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EX-31.1 - CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES - OXLEY ACT OF 2002 - Conforce International, Inc.cfri10ka220090331ex31-1.htm
EX-31.2 - CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES - OXLEY ACT OF 2002 - Conforce International, Inc.cfri10ka220090331ex31-2.htm
EX-23.1 - AUDITOR CERTIFICATION - Conforce International, Inc.cfri10ka220090331ex23-1.htm
EX-32.1 - CERTIFICATION OF OFFICER PURSUANT TO SECTION 906 OF THE SARBANES - OXLEY ACT OF 2002 - Conforce International, Inc.cfri10ka220090331ex32-1.htm
EX-32.2 - CERTIFICATION OF OFFICER PURSUANT TO SECTION 906 OF THE SARBANES - OXLEY ACT OF 2002 - Conforce International, Inc.cfri10ka220090331ex32-2.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K /A
(amendment no. 2)

(Mark One)

x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended March 31, 2009
Or

o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ____________ to ______________

Commission file number 001-34203

Conforce International, Inc.
(Exact name of registrant as specified in its charter)

Delaware
 
68-6077093
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)

51A Caldari Road
2nd Floor
Concord, Ontario L4K 4G3
Canada
 (Address of principal executive offices) (Zip Code)
 
           (416) 234-0266 
 (Registrant’s telephone number, including area code)
 
Securities registered under Section 12(b) of the Act: None
 
Securities registered under Section 12(g) of the Act:
 
Title of each class
to be so registered
 
Name of each exchange on which
each class is to be registered
Common stock, par value $0.0001
 
Over-the-Counter/Pink Sheets

 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o    No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o    No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yesþ   No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o
Accelerated filer                    o
Non-accelerated filer   o
(Do not check if smaller reporting company)
Smaller reporting company þ
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o    No þ

As of March 31, 2009, there were 120,001,000 shares of our common stock issued and outstanding with a market value of $0.17 per share as at September 30, 2008

DOCUMENTS INCORPORATED BY REFERENCE
None.

 
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Conforce International, Inc. is filing this Amendment No. 2 on Form 10-K/A (the “Amendment”) to its Annual Report on Form 10-K for the year ended March 31, 2009, originally filed July 29, 2009 (the “Original Filing”) and the first amendment filed on October 22, 2009 (“Amendment No. 1”) to amend and restate the previously-filed consolidated financial statements for the years ended March 31, 2009 and 2008 (and related disclosures) and to correct other errors in the originally filed report and Amendment No. 1.  Accordingly, the following sections have been amended: financial statements for the fiscal years ended March 31, 2009 and 2008 contained in Part II, Item 8 of this Amendment and conforming changes to the Business section contained in Part 1, Item 1 and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in part II, Item 7 of this Amendment.  In addition the following sections have been amended to correct errors: ending stock prices in Part II, Item 5 and Management’s report on Internal Control over Financial Reporting contained in Part II, Item 9AT of this Amendment. The errors were discovered after a change in auditors prompted management to conduct a thorough review of its previously filed financial statements and its Form 10-K.  
 
This Amendment also contains currently dated certifications as Exhibits 23.1, 31.1, 31.2, 32.1 and 32.2 hereof. In order to preserve the nature and character of the disclosures set forth in the Original Report, except as expressly noted above, this report speaks as of the date of the filing of the Original Report, July 29, 2009, as amended on October 22, 2009, and we have not updated the disclosures in this report to speak as of a later date. All information contained in this Amended Report is subject to updating and supplementing as provided in our reports filed with the SEC subsequent to the date of the Original Report.

PART I
 

BUSINESS DEVELOPMENT

Conforce International, Inc. is a Delaware corporation headquartered in Concord, Ontario, Canada.  Unless otherwise noted, references in this 10K report to “Conforce International, Inc.,” “Conforce,” “CFRI,” the “Company,” “we,” “our” or “us” means Conforce International, Inc.  Our principal place of business is located at 51A Caldari Road, 2nd Floor, Concord, Ontario L4K 4G3 Canada. Our telephone number is (416) 234-0266.

Management of Conforce has been in the shipping container business repairing, selling or storing containers for over 25 years.  The Company operates a Container Terminal through Conforce 1 Container Terminals, Inc. (“Conforce 1”). Conforce 1 provides complete handling and storage of marine shipping containers to its client base of International shipping lines.  The container depot has a capacity of over 5,000 containers.  Its fully integrated software system allows shipping line customers on-line access 24/7 to create bookings, view container inventory and status, and to print standard and customizable reports. Full service features include empty and loaded container lift on-off services, short and long term storage for empty and loaded containers, on-site container-reefer vendors for container repair services, 460V plugs for continued container temperature control while stationed at the terminal, on-site fuelling and steam cleaning, and container modifications to client specifications. The Container Terminal is the Company’s primary source of revenue. The Company generates revenues as a result of charges assessed to shipping lines for the lifting and handling of their empty containers while stored at the Container Terminal until their next use. The Container Terminal also charges for related services such as the abovementioned fueling and power stations for temperature controlled containers.

In addition to the business of the container terminal as described above, the Company has been engaged in the research and development of a polymer based composite shipping container flooring product, EKO-FLOR.
 
EKO-FLOR xcs, the first version of the product, was officially introduced to the container industry on December 5, 2006 at the 31st annual Intermodal Conference in Hamburg, Germany, the world’s leading shipping container event. Based on the initial reception to the composite, the Company learned that the industry was interested in a composite alternative, however, the product needed to weigh less than the current wood standard. Based on this feedback, Conforce continued to refine its product and as a result, it was able to introduce a lighter, less expensive version, EKO-FLOR cs-2, in December 2007 at the Intermodal Show in Amsterdam, Netherlands. Based on industry feedback related to the surface coating, the Company continued to develop the product until it was able to officially launch EKO-FLOR cs-4 in December 2008. Conforce introduced its latest light-weight version to customers during a series of meetings held in Hamburg, Germany, the location of the 2008 Intermodal Conference. These meetings in December 2008, which were held in a designated boardroom at the Hamburg Renaissance, were scheduled with shipping lines and lessors who ranked in the top ten, in terms of volume purchases of new build containers in their respective business segments. Of the potential customers in attendance, only one had previously conducted dry-land testing of the EKO-FLOR product at a production facility in China. Such testing was conducted using internal methods consistent with random tests conducted on new build containers equipped with wood floors. The companies in attendance were solicited based on their on-going interest in the product and their willingness during 2007 and 2008 to provide feedback to Conforce so that the Company could make improvements to the product in the areas of weight and surface coatings. During and following the meetings, orders were placed for ocean-going trials of EKO-FLOR cs-4. (The difference in the product versions described above has been more fully explained in the Principal Products section of this document).

As a result, EKO-FLOR cs-4 will be evaluated through ocean-going tests conducted by shipping lines and container lessors.  The Company expects that approximately six hundred (600) EKO-FLOR cs-4 equipped containers will be in circulation on or about October - December 2009 for final testing. The Company originally expected to have its product in circulation for testing between May and July 2009; however, final preparation as it relates to production equipment, personnel and processes have caused the trial date to be delayed as stated above. At this time, the Company does not expect any further delays. 
 
The Company has also developed EKO-FLOR ms-1, a composite panel designed specifically for use as shelving in United States Military special application marine containers. Consistent with a Letter of Intent received by Conforce in May 2008 from its military sub-contractor, Sea Box Inc., the first order from Sea Box for ms-1was received in December of 2008. The order consisted of racking for special application containers and will generate revenues in excess of 1 million USD over 12 months until January 2010. Shipments of ms-1 commenced in January 2009.

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In order to help ensure the successful commercialization of EKO-FLOR, on February 2, 2009, the Company signed a definitive agreement with Bayer MaterialScience LLC (“Bayer”) establishing a strategic partnership between Conforce and Bayer. Bayer is one of the world’s leading polymer companies and is a division of Bayer AG, a recognized leader in health care, nutrition and advanced materials. For Conforce, the agreement provides key support in the areas of advanced material and design analysis, efficient production practices, technical expertise and know-how, and a global material supply chain consistent with the projected requirements of EKO-FLOR.  The goal of the Partnership is the successful commercialization of EKO-FLOR through the use of advanced design and material analysis, efficient production practices through on-going training and support, and the logistical development of a material supply chain.  Conforce will produce or have produced on its behalf EKO-FLOR profiles using Bayer Products (polyurethanes, polyurethane coatings and polyurethane pultrusions).  Bayer will receive samples of EKO-FLOR produced by or on behalf of Conforce using Bayer Products for testing, evaluation, determining and making any modifications to Bayer Products which Bayer believes may improve the physical properties, appearance or processing of EKO-FLOR.  Bayer will allocate the know-how, technical expertise and human resources Bayer deems necessary to assist with the setup and production of EKO-FLOR trial orders and the establishment of a production facility in Asia, if/when necessary.  Such assistance will include the analysis of current Conforce production processes in order to ensure a seamless transition from local single-line production to scalable multi-line manufacturing in Asia.  Bayer will ensure that Conforce has access to an adequate supply of Bayer products for production of EKO-FLOR and Bayer has provided and will continue to provide economic assistance to Conforce towards the development of EKO-FLOR.  The term of this Agreement will be for a period of one (1) year from the date first written above. This Agreement may be extended or terminated by mutual agreement of the parties.  Either party may terminate this agreement at any time upon thirty (30) days’ written notice to the other party with such termination to become effective at the conclusion of such thirty (30) day period.  However, all intellectual property rights as explained under the Patents section will survive the termination of such agreement.  For Bayer, the agreement provides revenue through resin supply to Conforce. As such, Conforce and Bayer will, at a later date to be mutually agreed upon, enter into, execute and deliver definitive operational agreements which may include multi-term material supply agreements and joint development agreements. To-date, no such agreements have been signed that will bind the Company at this time.

Conforce and Bayer have collaborated on the design of the special application military container panels, EKO-FLOR xts trailer flooring and cs 4 container flooring.  Bayer has contributed its technical expertise in identifying and providing polyurethane resins that will maximize strength, while minimizing weight.   The combined collaborative efforts of Bayer and Conforce have been ongoing from July of 2008 through the date of this filing.  Bayer’s role in the development of EKO-FLOR has been to optimize the production process, including advice relating to the design of the pultrusion production line and, as previously stated, advice concerning the optimal polyurethane resin mix.  Bayer has provided third-party consultants, at its own expense, to design various components of the pultrusion production line.  In addition, it has provided Bayer employees at its own cost to act as consultants and attend the Conforce production and development centre in Ontario for purposes of overseeing the configuration of the pultrusion production line and fabrication of the EKO-FLOR panels.  Bayer has provided economic assistance to Conforce in two ways:  (1) Bayer has incurred the cost of certain components used in the pultrusion production line and certain development costs associated with the production of the special application military container panels; and (2), as previously stated, Bayer incurred the cost of certain third-party consultants and provided Bayer employees at its own cost to act as consultants.  There are no specific agreements in place pertaining to the provision of any additional economic assistance by Bayer to Conforce in the future.  Although it is likely that Bayer will provide similar economic assistance in the future, it is not possible to predict the precise nature of such assistance at this time.  To date, Conforce has paid approximately $116,000 to Bayer in exchange for supplying resins to Conforce.  The amount that Bayer will receive from Conforce in the future will depend upon the level of market acceptance of EKO-FLOR.     

It is important to note that all revenues up to December 31, 2008 were generated by the container terminal operations, which was formed in November 2003 with first revenues being recorded in April 2004. Research and development of EKO-FLOR has been primarily funded by cash provided by the terminal operations. During the quarter ended March 31, 2009, , the Company reported its first revenues from the sale of EKO-FLOR shelving panels to its military contractor, Sea Box.

The results from operations of the Company’s two operating divisions are as follows:

For the year ended March 31, 2009, the Company’s Terminal division had revenues of $1,553,540 with net income of $12,897, and the EKO-FLOR division had revenues of $346,211 with a net loss of $391,127  Consolidated revenues were $1,899,751 for the year ended March 31, 2009 with a total net loss of $378,230.
 
PRINCIPAL PRODUCTS

Conforce is comprised of two separate and distinct operating divisions:
 
1.        Conforce 1 Container Terminals, Inc. (“Conforce 1”) is a full-service container terminal providing storage and handling for ocean-going containers.

Conforce 1 provides complete handling and storage of Marine shipping containers to its client base of International shipping lines.  The container depot has a capacity of over 5,000 containers.  Its fully integrated software system allows customers on-line access 24/7 to create bookings, view container inventory and status and to print a number of standard and customizable reports.

The full service features offered include, empty and loaded container lift on-off services, container repairs through TRC, short and long term storage for empty and loaded containers, EDI capability, on-site container-reefer vendors for  container repair services, 460V plugs for continued container temperature control while stationed at the terminal, on-site fueling and steam cleaning services and container modifications to client specifications.

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2.        Conforce Container Corporation is dedicated to the production, development and commercialization of the new ISO1496 certified container flooring system, EKO-FLOR. 

EKO-FLOR is a composite flooring system designed to replace plywood flooring in shipping containers.  

EKO-FLOR xcs was the first version of the product developed. It was similar in weight to apitong plywood at 304 kgs per 20 foot container.

EKO-FLOR cs-2 was designed for use in general cargo applications. The product weighed 270kg per 20 ft. container.
 
EKO-FLOR cs-4 was designed throughout 2008 as a result of evaluations and suggestions by container industry participants. The product contains a new anti-slip top coat surface jointly developed by Conforce and Bayer MaterialScience AG. The product meets specified requirements in terms of the weight and forces exerted on the product before failure occurs (“load bearing” or “load bearing properties”). The product was tested by the American Bureau of Shipping using standardized testing procedures for shipping containers. The primary test involved exerting pressure on the floor by rolling a test cart with a weight of 7,260kgs on two 7” wide solid rubber tires. The second major test involved lifting the container 6 - 12” off the ground while carrying 60,960kgs of cargo (two times its maximum capacity of 30,480kgs per twenty foot container).  EKO-FLOR cs-4 will replace xcs and cs-2 and is the version of the product that will be tested by customers in ocean-going trials.   The EKO-FLOR cs-4 panels are currently being produced at Conforce’s own development center in Concord, Ontario.
 
EKO-FLOR ms-1 has been developed as a load bearing shelving system for use in special application United States military containers.
 
The Company is currently having the ms-1 panels produced at a sub-contracted facility in Quebec, Canada.
 
Please refer to the Growth Strategies section for discussion of anticipated revenues.

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PRINCIPAL COMPETITIVE STRENGTHS
 
Container Terminal Division

Although the terminal offers full service features as described in Item 1 above, such features are offered by most terminals and are not considered a unique competitive strength. The Company was able to enter the terminal business based on its existing relationships with shipping lines through management’s business dealings while formerly employed by TRC. Therefore, its main competitive strength remains relationship driven as well as its focus on customer service.

The terminal can also accommodate temperature controlled containers, known as reefers, as a result of its investment in a generator valued at approximately $60,000.

PRINCIPAL CHALLENGES

Container Terminal Division

The principal challenges related to the terminal business are customer retention in a competitive environment and decreasing container traffic as a result of the global economic downturn which has adversely affected storage and transportation services required by international shipping lines. With respect to the latter, the economy has caused terminal operators to aggressively reduce rates in an attempt to increase traffic. This strategy is advantageous to terminals who may offset the reduced margins with increased revenue from ancillary services such as long-haul transport. For Conforce, reducing its rates cannot be offset and will lead to reduced gross margin. The Company is currently estimating that revenues and gross margin in the terminal operations division will decrease in fiscal 2010.

In addition to unsolicited rate reductions by terminal operators, shipping lines have also requested rate reductions citing the global economy as the reason. The Company will be forced to temporarily reduce such rates in order to retain the business.

Another challenge faced by the terminal is its geographic location. Being closer to major rail yards such as Canadian National (CN) and Canadian Pacific (CP) railways is an advantage. Of the four competitors described on page 9 of this document, Conforce is the furthest from the major railways. More specifically, the Conforce terminal is located approximately 50 kilometers from CN whereas the Coyote terminal is approximately 8 kilometers from CN and 3 kilometers from CP.
 
EKO-FLOR Division
 
One of the principal challenges faced by EKO-FLOR is the upfront premium. This hurdle was significant when the product was first introduced to the industry in 2006, however, the Company has been able to decrease the product price by over $200 per 20 foot container.  The premium represents an increase of approximately 15% or $290 to the total price of a 20 foot equivalent container.

Another challenge the Company will face will be the establishment of a manufacturing facility in China. To do so, the Company will need to rely on strategic partnerships with entities having expertise as it relates to business and production practices in China. Currently, the Company uses a Canadian sub-contracted facility for production of its military shelving panel.  For the production of cs-4 trial product, the Company will use its own Development Centre in Concord Ontario, where two production lines have been installed.

Based on the current economic downturn, the Company may also face potential delays in terms of first orders, should the outcome of the trials be positive.  Customers currently using wood products may be less inclined or motivated to switch to composite flooring, EKO-FLOR, due to the abovementioned premium and the overall fear of change in an economy where funds are tight.  The production of new build containers was approximately 2.75 million twenty foot equivalent units in 2008, new builds for 2009 are expected to be significantly lower at 1 million units 1 and projections for 2010 are uncertain at this time.  
 
1 Containerisation International Magazine, March 2009, Available for subscribers only.

GROWTH STRATEGIES
 
While Conforce has a well established core business with regard to its container storage terminal, it does not contemplate much, if any, growth in terminal revenues.  However, the Company’s EKO-FLOR container flooring system, which is in the development stage, continues to exhibit significant growth potential, e.g. ocean-going trials planned by international shipping lines.  The Company’s success depends to a significant extent on the performance of a number of senior management personnel and other key employees, including production and research and development personnel.  The success of Conforce continues to depend to a significant extent on its ability to identify, attract, hire, train and retain qualified professional, technical, production and managerial personnel.
 
In May of 2008 Conforce received a Letter of Intent (LOI) from a U.S. based Military contractor, Sea Box, Inc., for the purchase of the Company’s newly developed composite product, EKO-FLOR ms-1, designed exclusively for use as load bearing shelving in special application United States Military shipping containers.  The LOI contemplates a renewable multi-year contract whereby Conforce will provide product for a minimum of 10,000 special application containers. In December 2008, the company received its first order (firm commitment) in connection with the LOI for EKO-FLOR ms-1 from its US military contractor, Sea Box, Inc. to provide the product for over 5,000 special application military containers, generating revenues in excess of 1 million USD. The Company is currently having the ms-1 panels produced at a sub-contracted facility in Quebec, Canada.  As previously stated, Conforce will manufacture the cs-4 trial product at its Production and Development Centre in Ontario.  The production capacity of the pultrusion production line situated in the Production and Development Centre is currently limited to the production of the cs-4 trial product.  Once the trial product has been manufactured in full, the Company may produce the ms-1 product itself at the Production and Development Centre in Ontario rather than on a sub-contracted basis in Quebec.
 
The Company has received firm trial orders for approximately 600 twenty foot equivalent units, with a value of approximately $350,000,for its EKO-FLOR cs-4 composite container flooring system from various shipping lines and leasing companies.  Receipt of such $350,000 is for conducting of the ocean-going trial (use of EKO-FLOR in the trial) by a shipping line or leasing company.  Depending upon the results of such trial, should such shipping line and/or leasing company decide to place a firm commitment/purchase order with Conforce, further revenues will be generated by Conforce as agreed to in such firm commitment/purchase order.  The amount of such revenues is unknown by Conforce until receipt of such firm commitment/purchase order.  The EKO-FLOR cs-4 panels are currently being produced at Conforce’s own development center in Concord, Ontario.  Currently, shipping lines will purchase approximately 60 – 65% of their fleets annually while the balance will be leased. Therefore, leasing companies represent on average approximately 40% of the annual purchases of new build containers. The trials will consist of placing EKO-FLOR equipped containers loaded with various types of cargo, to be determined at the discretion of the shipping lines, and to have such loaded containers placed on ocean-going vessels to be transported on routes also to be determined at the sole discretion of the shipping lines. The success of the trials is determined not only by the securing of purchase orders but also by what is gained or learned from the feedback provided by the shipping lines.

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It is important to note that in the event the outcome of the trials are successful and if the Company receives from its customers written orders for year one volume of approximately 60,000 twenty foot equivalent units, then the Company intends to establish an EKO-FLOR manufacturing facility in China. To do so, the Company would require financing of $8 million to $10 million. Currently, there is no such financing in place, nor are there any preliminary or final term sheets or agreements in place in support of such financing. If and when Conforce receives such written orders, it is at that time that various financing avenues will be considered such as private placements or public offerings. 

Conforce, along with any company doing business internationally, will be subject to currency fluctuations and fluctuations in the applicable exchange rate.  Fluctuations in the exchange rate between the Chinese RMB and the Canadian dollar could adversely affect the Company’s operational results as well as the value of some Conforce assets and liabilities.

Moreover, some of the Company’s material agreements may be governed by foreign law, e.g. Chinese laws.  Accordingly, should Conforce ultimately establish a facility in China, the Company will engage competent Chinese legal counsel to represent the Company and advise them with regards to Chinese licensing registration or other regulatory requirements and policies prior to styling and producing any material agreements.  Additionally, some of the Company’s material agreements may be governed by foreign law, e.g. Canadian laws; however, there exists a strong parallel between Canadian laws and the laws of the United States.  Conforce is physically located in Concord, Ontario, but is incorporated in the state of Delaware and subject to the laws of the state of Delaware and the United States.  Conforce has a resident agent in Delaware who is identified and required to accept service of process on behalf of Conforce and its Officers.  Accordingly, service of process is not made more difficult due to the location of Conforce’s headquarters.
 
The Company was organized under the laws of the State of Delaware. The Company’s resident agent for service is Harvard Business Services, Inc., located at 16192 Coastal Highway, Lewes, Delaware 19958. Investors located in the United States may effect service of process upon Harvard Business Services, Inc. and commence legal proceedings in a United States Federal Court. Accordingly, it would not be materially more difficult for a U.S. investor to commence a legal proceeding against the Company notwithstanding the fact that certain material agreements of the Company may be governed by Ontario law, its principal place of business is located in Concord, Ontario and its Officers and Directors are residents of Ontario.
 
Currently, all agreements that are material to the business and affairs of the Company are governed by jurisdictions within the United States or Canada. In the future, the Company will ensure that all material agreements governed by jurisdictions outside of the United States or Canada contain appropriate dispute resolution mechanisms pertaining to the submission of all disputes to the Stockholm Chamber of Commerce in Stockholm, Sweden. Any award rendered by this arbitration tribunal is enforceable in accordance with the “United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958).” Therefore, as a practical matter, although no assurances can be given, the legal infrastructure of any particular foreign jurisdiction, while different from its United States counterpart, should not present any risk to a Conforce investor who is a resident of the United States or any significant impediment to the operation of Conforce in any foreign jurisdiction.
 
The production, in part, of EKO-FLOR products at third-party contracted facilities immediately brings in to question the following: (i) quality control; (ii) timely delivery of finished products; and (iii) quality and pricing of raw materials, etc.  Conforce management will conduct thorough and complete due diligence investigations of any such third-party contractor.  Additionally, material contracts will be comprehensive, strictly construed, and rigidly enforced.

The Company intends to enter the North American highway trailer market with a similar flooring product. The North American trailer product, EKO-FLOR xts, is in the final development stage and the Company expects to be able to produce a die specific for the trailer product by November 2009.  Prior to funding the remaining cost of development and dies, the Company will supply existing cs-4 panels to trailer manufacturers for industry certification and road trials in or around September 2009. By using its company owned production facility in Canada the initial estimated cost of entry into the North American highway trailer market is approximately $300,000. Should the outcome of EKO-FLOR trials be successful, the Company’s production and development centre in Concord, Ontario will be unable to satisfy the potential demands of the trailer industry and therefore, the Company is considering the establishment of a manufacturing facility in or around Indiana, which is considered the central location for the manufacture of highway trailers for the North American market. The total cost to establish such a facility is currently estimated to be $4.75 million to $5.50 million.
 
The Company intends to develop flooring for the Cruise Line industry and has had preliminary discussions with Carnival Cruise Lines. The Company expects to produce a prototype panel for use as a replacement to teak wood currently used on cruise ships. The Company does not expect to provide product if at all, to Carnival until March of 2011. Total cost of entry into the decking market for cruise lines is unknown at this time, however, the Company intends to use net proceeds from the sale of EKO-FLOR cs-4 and ms-1 for the development of the product.
 
The Company plans to develop and commercialize a residential flooring application that will further contribute to the development of the EKO-FLOR brand and will enable the Company to capitalize on the significant “do-it-yourself” home and cottage renovation market. The product will be designed for use on docks as a replacement for wooden docks suffering deterioration due to continued exposure to water, sunlight and general weather elements. EKO-FLOR decking would have similar properties as those found in EKO-FLOR cs-4 and ms-1 but would not require the same load bearing strength characteristics. The Company has not developed a sales channel for this product as of yet, however, the Company’s V.P of Product Development is also the technical chairperson for the National Composites Council of Canada. The Company intends to rely on his expertise and contact base as it relates to the development and commercialization of the outdoor decking product. Prototypes of the product are scheduled for the second quarter of 2010. Total cost of entry is estimated to be approximately $200,000. Net proceeds from the sale of EKO-FLOR cs-4 and ms-1 will be applied to the development of the product.

DISTRIBUTION METHODS

The Company intends to sell its products directly to International shipping lines for use in newly manufactured containers through, either its internal sales staff, broker/selling agents (of which it has 2 in Europe), and military contractors (of which it has one in the USA, Sea Box). As of January 2009, the Company began shipments of EKO-FLOR ms-1 to its aforementioned military sub-contractor.
 
INDUSTRY OVERVIEW

According to Containerisation International Magazine, there were 3.9 million new containers manufactured in 2007 (1).
 
Containers are currently equipped with floors made from tropical hardwoods, the most common being Apitong. The container industry is aggressively seeking a viable alternative to hardwood. (2)

Regarding the current state of the shipping container industry as a result of the recent global economic downturn, it is important to note that new build volume in 2008 was projected to be 3.85 million 20 foot equivalent containers as of third quarter 2008; however, due to a slowdown in the fourth quarter, actual 2008 annual production was approximately 2.75 million twenty foot equivalent containers. Volume for the production of new containers is projected to be down significantly in 2009 and is currently projected to be approximately 1 million twenty foot equivalent containers. (3)

Shipping rates are also expected to decrease, which could put additional pressure on shipping lines as revenues and earnings decrease. According to Drewry Supply Chain Advisors division director Philip Damas, “Demand is no longer sufficient to absorb new vessel capacity. As a result of anemic growth and over-capacity, container freight rates have fallen on several key routes, with the notable exception of the transpacific, where carriers have withdrawn substantial capacity. Shippers should expect container rates to decline by about 15 percent during the current down-cycle, although any reductions will also depend on the level of fuel surcharges.” (4)

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According to a report published on December 8, 2008 by Deutsche Bank Research (5), the long-term prospects for container shipping are favourable. The report states that “Despite the current economic slowdown, container shipping is expected to continue to be a growth sector (+7 to 8% p.a. until 2015).” The report states that while it expects significant problems for shipping companies in the short-term as a result of over-capacities and declining freight and charter rates, the medium and long-term prospects remain intact. The report concludes although “the crisis is severe, there is no reason [for the industry] to panic.”
 
(1) Source: Containerisation International Magazine article titled “Reach for the Sky,” dated February, 2008. Available to subscribers only.
(2) Source: World Cargo News article titled “Floors – the container’s Achilles Heel,” dated January, 2007. Available to subscribers only; however, excerpts are available online at no charge.
(3) Source: Containerisation International Magazine article dated May, 2009. Available to subscribers only.
(4) Source: Logistics Management article titled “Ocean shipping/global transportation: Economic slowdown is weighing on ocean carriers,” dated November 19, 2008. Available to the public for a nominal fee; however, excerpts are available online at no charge.
(5) Source: Deutsche Bank Research article titled “Prospects for container shipping industry,” dated December 8, 2008. Available to the public at no charge.
 
PRODUCT DEVELOPMENT
 
The Company has developed a composite container flooring product as an alternative to the wood flooring currently used in the majority of containers in circulation. The Company has received trial orders for EKO-FLOR cs-4 totaling approximately 600 - 20ft equivalent containers. The Company expects that ocean-going trials will be completed during calendar fourth quarter 2009.
 
The Company has developed EKO-FLOR ms-1, a composite shelving system designed for use in special application military containers. The Company recently received an order from its US military contractor to equip over 5,000 special application US military containers with EKO-FLOR ms-1. The first order will generate annual revenues for Conforce in excess of $1 million.
 
COMPETITION
 
In terms of competition for the Conforce 1 Terminal Division, the Company has identified three similar container depots within a 50 km radius to the Conforce facility. Each of these depots provide similar services as does Conforce, each competes for the business of the international shipping lines.  The first competitor is ACS (Alrange Container Services) which has 2 smaller locations, one in Toronto, Ontario and another in Mississauga, Ontario (both depots are approximately 15 km. from the Conforce 1 depot) that when combined have a slightly larger total capacity than Conforce.  The second competitor is Musket Transport whose main depot is located in Mississauga, Ontario, approximately 2 km. from the Conforce 1 depot and their container capacity is comparable to Conforce’s, but Musket Transport also has other locations, which house trailers and reefers (the capacity of those locations is unknown).  The third competitor is P&W Transport whose depot is located in Oakville, Ontario, approximately 5 km. from the Conforce 1 depot and its capacity is slightly smaller than Conforce’s.

In terms of competition for the EKO-FLOR Division, the Company is competing for a share of the container flooring market that is currently dominated by the use of tropical hardwood. The Company is unaware of any other hardwood, except tropical hardwood, on the market that meets the strength requirements of ocean-going containers.  The customers being targeted are international shipping lines utilizing ocean-going containers.  
 
Singamas, a container manufacturer, has developed a variation of a composite floor that it is currently testing although the base composition is currently unknown to Conforce.

BASF has developed a prototype polymer/bamboo mix composite flooring product; however, the Company is unaware of any industry trials currently in place or scheduled.

Havco produces a composite coated wood product for the highway trailer industry. The coating is approximately 1mm thick while the remainder of the panel, approximately 27mm, is wood. This differs from EKO-FLOR panels for both containers and highway trailers as the EKO-FLOR composite flooring system is 100% wood-free.
 
PATENTS, TRADEMARKS, LICENSES, FRANCHISES, ROYALTY AGREEMENTS

Patents
As it relates to EKO-FLOR composite panels for containers and highway trailers, the Company’s trademark agent, Blakes Cassels & Graydon of Toronto, Ontario, has filed a provisional patent with the United States Patent and Trademark Office. The Company is currently preparing similar patent applications for filing, in Canada, China, Germany and Denmark.

Pursuant to the Letter of Agreement in Connection with the Strategic Partnership Between Conforce International, Inc. and Bayer MaterialScience LLC, Conforce will retain all of its rights, including patent rights, to EKO-FLOR and to any developments made solely by Conforce during the course of the strategic partnership. Moreover, Bayer will retain all of its rights, including patent rights, to the materials, compositions and formulations developed and/or supplied hereunder and to any other developments made solely by it during the strategic partnership.

In the near future, Conforce and Bayer intend to enter into a definitive agreement pertaining to the intellectual property rights relating to products that are jointly developed.  Pursuant to this agreement, Conforce and Bayer will equally share the ownership of all inventions created by both parties.  Furthermore, all costs related to the procurement of patent protection and any royalties or other forms of revenue derived therefrom, will be shared equally between the two parties.

-8-

 
Trademarks
The Company’s trademark agent has submitted EKO-FLOR trademark applications in the USA, Canada, China and with the European member states.

Licenses, Royalties and Supply Agreements
In 2005, the Company entered into an Extrusion Supply Agreement with Royal Group Technologies. However, since the execution of the aforementioned agreement, the Company has elected to use pultrusion technology as opposed to extrusion technology. Although the agreement has not been formally terminated, the Company has no plans to produce its EKO-FLOR product using extrusion technology. A termination fee was not paid by Conforce and the agreement will expire under its natural terms and conditions in December 2010. In 2008, the Company entered into a licensing agreement regarding the use of various patented technologies pertaining to equipment and processes being relied upon in connection with the manufacturing of EKO-FLOR. However, the Company has since altered its equipment and production processes and as such, will no longer rely on the technologies provided for in the aforementioned license agreement. A termination fee was not paid by Conforce and the agreement will expire under its natural terms and conditions in May 2015.

EMPLOYEES

Conforce employs 12 fulltime employees.  Four employees are primarily dedicated to the EKO-FLOR division, while eight employees work primarily within the container terminal division.
 
REGULATORY MANDATES

No industry specific governmental approvals are needed for the operation of the Company’s businesses.

REPORTS TO SECURITY HOLDERS

The Company will make available free of charge any of its filings as soon as reasonably practicable after it has electronically filed these materials with, or otherwise furnished them to, the Securities and Exchange Commission (“SEC”).  The Company is not including information contained on its website as part of, or incorporating it by reference into, this Form 10K.
 
The public may read and copy any materials the Company files with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0030. The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxies and information statements and other information regarding issuers that file electronically with the SEC.


Not applicable as Conforce is a smaller reporting company.


The Company’s headquarters are located at 51A Caldari Road, 2nd Floor, Concord, Ontario L4K 4G3, Canada.  The annual lease cost of these premises is $51,017. The Company has a container terminal located at 584 Hazelhurst Road, Mississauga, Ontario, Canada. The annual lease cost of these premises is $195,300. The Company has a 13,400 sq.ft production and development centre located at 111 Romina Drive in Concord, Ontario. The annual lease cost of these premises is $159,600.


The Company is not a party to any litigation and, to its knowledge, no action, suit or proceeding has been threatened against the Company. There are no material proceedings to which any director, officer or affiliate of the Company or security holder is a party adverse to the Company or has a material interest adverse to the Company.

 
None.
 
-9-


PART II
 

Conforce is a publicly traded company on the Pink Sheets under the trading symbol “CFRI.”  The Company intends to apply for listing on the OTC Bulletin Board at such time as it’s Forms 10 and 211 have been approved by the appropriate regulatory agencies; however, there is no guarantee that the Company’s application for listing will be accepted.

The Company’s common stock has traded on the Pink Sheets of the National Quotation Bureau under the symbol CFRI since September 15, 2005. The following table sets forth the high and low sale prices for the Company’s common stock for the periods indicated. The prices below reflect inter-dealer quotations, without retail mark-up, mark-down or commissions and may not represent actual transactions.

March 31, 2009
 
Low price
   
High price
 
Year ended
 
$
0.05
   
$
0.20
 
Quarter ended
 
$
0.10
   
$
0.15
 

HOLDERS OF RECORD

The Company has 34 registered shareholders of record.

DIVIDEND POLICY
 
The Company has never declared or paid any cash dividends on its common stock and it does not anticipate paying any cash dividends in the foreseeable future.  The Company currently intends to retain future earnings, if any, to finance operations and the expansion of its business.  Any future determination to pay cash dividends will be at the discretion of the Board of Directors and will be based upon the Company’s financial condition, operating results, capital requirements, plans for expansion, restrictions imposed by any financing arrangements and any other factors that the Board of Directors deems relevant.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

None.

UNREGISTERED SALE OF SECURITIES

None.

ISSUER PURCHASES OF EQUITY SECURITIES

None.


Not applicable as Conforce is a smaller reporting company.


Safe Harbor Act Disclaimer for Forward-Looking Statements

Certain statements in this document may contain words such as “anticipates,” “believes,” “could,” “estimates,” "expects," "intends," “may,” “projects,” “plans,” “targets” and other similar language and are considered forward-looking statements. These statements are based on management’s current expectations, estimates, forecasts and projections about the success of its container terminal operations, its newly developed container and trailer flooring products, as well as certain other composite based flooring products in various stages of development. These forward-looking statements are subject to important assumptions, risks and uncertainties which are difficult to predict and therefore the actual results may be materially different from those discussed.

-10-


OVERVIEW
 
The Company operates in two reportable business segments; Container Terminal, and EKO-FLOR. The Container Terminal operations are organized as Conforce 1 Container Terminals, Inc., which is a 50.1% owned subsidiary of the Company. The remaining 49.9% is owned by Marino Kulas, Conforce International, Inc President & CEO. The Conforce 1 subsidiary is responsible for all container terminal operations. EKO-FLOR is organized as Conforce Container Corporation (“CCC”), a 100% owned subsidiary of the Company. The CCC subsidiary is responsible for the development, manufacturing and marketing of the Company’s EKO-FLOR products. Operations for CCC during the reportable periods to date have been limited to research and development as the product is in the testing stages. Its EKO-FLOR products have evolved systematically with various refinements, as previously noted, based on industry standards and various feedback received.  Accordingly, though in the development stage and having generated no revenue to date, Conforce has informed shipping lines and leasing companies of its product, EKO-FLOR, and  the Company is optimistic about its prospects due to the fact that it is being tested in various ocean-going trials and receipt of the Sea Box, Inc. purchase order.

An advisory agreement between Worldwide Associates, Inc. (“Advisor”) and Conforce is in place and as such, Advisor has and continues to provide the Company with advisory services as it relates to general business items such as sales, marketing, financing, infrastructure enhancements and public company management.  Alexander P. Haig, Managing Director of Advisor has attended customer meetings with executives from Conforce, including various meetings held in Hamburg, Germany in December 2008. Pursuant to the agreement, Advisor is to provide Conforce consultation services and advice regarding general corporate strategy, new business development, potential acquisitions or partnerships and financial strategies.  The term of the agreement is in effect until April 2, 2010 and is renewable upon mutual agreement by the parties for addition one-year periods.  The agreement may be terminated by either party upon 90 days written notice to the other party.  Conforce agrees to compensate Advisor for its services by distributing to Advisor one percent (1%) of all gross revenues derived from transactions in which Advisor’s involvement or introduction results in the sale of services or products of Conforce, including EKO-FLOR. Conforce will reimburse Advisor for any extraordinary expenses and Advisor agrees not to disclose any confidential or proprietary information owned by, or received by or on behalf of Conforce.  To date, no fees have been paid by Conforce to Advisor under this agreement.
 
Regarding the revenues generated by the terminal operations, the Company reports revenues as a result of lifting and handling containers that are stored in the Company's container depot. Storage charges typically do not apply as the Company performs these services for only empty containers. In the event that a container loaded with goods is stored at the terminal, then a nominal daily storage rate is charged. These handling and lifting services are performed by the Company and are not sub-contracted to any third parties. Regarding the revenues generated by transportation services in the operations of the Container Terminal division, the Company provides sub-contracted transportation services for containers arriving or departing to and from Canadian rail yards. Such sub-contracted services are arranged by the Company at the request of its shipping line customers and are facilitated through the use of local transportation companies. The Company charges a surcharge for arranging such shipments and is paid directly by the shipping lines. In turn, the Company pays the sub-contracted transportation companies.

The principal challenges related to the terminal business are customer retention in a competitive environment and decreasing container traffic as a result of the global economic downturn which has adversely affected storage and transportation services required by international shipping lines. With respect to the latter, the economy has caused terminal operators to aggressively reduce rates in an attempt to increase traffic. This strategy is advantageous to terminals who may offset the reduced margins with increased revenue from ancillary services such as long-haul transport. For Conforce, reducing its rates cannot be offset and will lead to reduced gross margin. The Company is currently estimating that revenues in the terminal operations division will decrease by approximately 30% in 2009 while gross margin will be reduced by approximately 5%.

In addition to unsolicited rate reductions by terminal operators, shipping lines have also requested rate reductions citing the global economy as the reason. The Company will be forced to temporarily reduce such rates in order to retain the business.

Another challenge faced by the terminal is its geographic location. Being closer to major rail yards such as Canadian National (CN) and Canadian Pacific (CP) railways is an advantage. Of the four competitors described on page 9 of this document, Conforce is the furthest from the major railways. More specifically, the Conforce terminal is located approximately 50 kilometers from CN whereas the Coyote terminal is approximately 8 kilometers from CN and 3 kilometers from CP.

For the year ended March 31, 2009, the Company's Container Terminal business segment had revenues of $1,553,540 with  net income of $12,897. For the same period, the Company's EKO-FLOR business segment had revenues of $346,211 and a net loss of $391,127.

 PLAN OF OPERATIONS
 
In 2009, the Company’s primary focus will be on the commercialization of EKO-FLOR. With the introduction of EKO-FLOR revenues as a result of ms-1 panel orders, the reliance on the container terminal will decrease. Accordingly, the Company intends to pursue opportunities as they relate to three EKO-FLOR products (as described below). While the container terminal is expected to continue to provide revenues and moderate earnings, if any at all, growth in the terminal operations is not expected. Expansion for Conforce is expected to come from EKO-FLOR ms-1 in 2009 and cs-4 in 2010, where the Company believes that notwithstanding the current economic slowdown, significant growth potential exists due to the pressing need for composite flooring within the industry. Should the container industry in 2010 collectively produce one half of its 2007 new build volume of 3.9 million twenty foot equivalent containers, the Company would still experience significant growth assuming it is able to meet expectations of orders totaling approximately 60,000 units or approximately 2% of global new build volume.

EKO-FLOR cs-4: Trial product will be shipped to customers in or around October 2009. Trial completion times may range from 60 – 120 days depending on sea routes and frequency selected by trial customers, in their sole discretion. Conforce estimates that most trials will be completed in the fourth quarter of calendar 2009. The EKO-FLOR cs-4 panels are currently being produced at Conforce’s own development center in Concord, Ontario.

EKO-FLOR xts: In the third quarter of calendar 2009, the Company intends to introduce EKO-FLOR xts to the North American highway trailer industry. The Company will offer a modified version of its cs-4 container panel in order to commence actual over-the-road testing by industry participants. The Company expects that over-the-road EKO-FLOR xts testing will commence in or around September 2009.

Provided that the aforementioned trials are successfully completed and that the outcome is positive, the Company expects that it will secure EKO-FLOR cs-4 and EKO-FLOR xts orders for 2010. It is the belief of management that Conforce will receive such orders, however, there is no assurance that it will secure these orders or generate any sales revenue at all. Provided that EKO-FLOR cs-4 volume commitments are secured and that such commitments are in-line with Conforce expectations of 60,000 - 80,000 TEU for calendar 2010, then the Company will begin the process of formalizing the details of a financial offering intended to adequately capitalize the establishment of a company owned facility in Asia. As such, the Company would require financing of 8 – 10 million USD. Currently, there is no such financing arrangement in place, nor are there any preliminary or final term sheets or agreements in support of such financing. If and when it receives such written orders, the Company will explore various financing alternatives including private placements, public offerings and debt financings. The final details pertaining to such financing will depend upon prevailing market and economic conditions. However, there are no guarantees that the Company will be able to obtain such funding under reasonable terms, if at all.

EKO-FLOR ms-1: In 2010, the Company also expects, as a result of the Sea Box, Inc. purchase order, to receive equivalent orders to those received in 2009 for EKO-FLOR ms-1, a variation of the cs-4 flooring panel designed for use as load bearing shelving panels in special application military containers. The Company is currently producing the ms-1 panels at a sub-contracted facility in Quebec, Canada. It is the belief of management that Conforce will receive these orders, however, there is no assurance that it will secure such orders or generate any sales revenue at all.
 
The Company intends to apply for listing on the OTC Bulletin Board at such time as its Forms 10 and 211 reach the no-comment stage by the appropriate regulatory agencies, however, there is no guarantee that the Company’s application for listing will be accepted.
-11-

 
LIQUIDITY AND CAPITAL RESOURCES

The Company intends to raise, either through an Initial Public Offering of its securities or a Private Placement, the capital required for the establishment and operation of a multi-line EKO-FLOR manufacturing facility in Asia, which is currently estimated to be between $8 million and $10 million.  The Company will make the decision in terms of its production expansion into Asia at such time as the trials of EKO-FLOR cs-4 are completed (currently projected to be completed in or around December 2009) and if it has received a firm commitment(s) from shipping line(s) and/or leasing companies for the production of EKO-FLOR cs-4.

The Company does not currently have any outstanding lines of credit or letters of credit.  Conforce does have a business development loan through a government sponsored program in the amount of CDN $250,000 (USD $218,766)-payable over 10 years (due January 2019) bearing a rate of interest of prime + 3%.  The agreement calls for monthly payments of $2,303 including principal and interest. The balance outstanding as at March 31, 2009 was $195,713. The current portion of this balance as at March 31, 2009 was $17,785 and the long term portion was $177,928 as described in Note 9 of the financial Statements. The loan was made through the small business development loan program (SBL) and is limited in its use to the purchases of equipment.  Funds from the loan have been used to finance a portion of the production equipment in the Company’s new development and production facility in Concord, Ontario and such equipment has been used as collateral for the loan.  Under the rules governing SBL’s, in the event the Company defaults on the loan, the Company is only responsible for repayment of an amount equal to 25% of the total funds advanced.
 
The Company does not have any agreements in place to fund the operations for the next 12 months. Conforce is attempting to secure additional funding in the amount of approximately $500,000, by way of non-interest bearing, non-callable (for 10 years) loans from certain minority founding shareholders. Such loans will be made to the Company from the proceeds of private transactions with accredited investors involving the sale of Conforce common stock. To date, the shareholder loans have been oral.  At present, the Company intends to enter into additional oral agreements pertaining to future shareholder loans. Proceeds from these transactions will be used to fund any and all costs associated with the production of trial product. It is important to note that should the outcome of trials be favorable, the Company will be required to raise significant additional capital for purposes of establishing an EKO-FLOR manufacturing facility in China. Such capital requirement is currently estimated to be $ 8 million to $10 million.  The Company had received loans, pursuant to oral agreements, from Marino Kulas, CEO and related parties, equal to $567,633 as at March 31, 2009.
 
Investing activities for the year ended March 31, 2009 included purchases of equipment such as a pultrusion line, two dies and ancillary equipment for the Company’s production and development centre totaling $623,595. Financing for the purchase of this equipment was provided by related party loans payable , cash receipts from terminal operations as well as the Small Business Development bank loan.
 
-12-


RESULTS OF OPERATIONS
 
YEAR ENDED MARCH 31, 2009 COMPARED WITH THE YEAR ENDED MARCH 31, 2008

The Company had gross revenues of $1,899,751  with a net loss of $378,230 for the year ended March 31, 2009, compared with sales of $2,364,335 with a net loss of $147,178 for the year ended March 31, 2008. The decrease in sales was due primarily to the downturn in the global economy and consequent decreased demand for transportation services and container operations. Revenues for the Terminal division for the year ended March 31, 2009 decreased by 34.3%.  The decrease in revenues from the Terminal division was partially offset by $346,211 in revenue generated from the EKO-FLOR division.

During the year ended March 31, 2008, the Container Terminal division was the only revenue generating operation of the Company; however, during the year ended March 31, 2009, the Company reported revenues from the sale of EKO-FLOR ms-1 military panels beginning in January 2009. Revenues of EKO-FLOR ms-1 for the period January 1, 2009 to March 31, 2009 were $346,211.

The results from operations of the Container Terminal division are as follows:

For the year ended March 31, 2009 the Company had revenues of $1,553,540 with net income of $12,897, compared with revenues of $2,364,335 with net income of $101,882 for the year ended March 31, 2008.

The results from operations of the EKO-FLOR division are as follows:

For the year ended March 31, 2009 the Company had revenues of $346,211 with net loss of $391,127, compared with no income and a net loss of $249,060 for the year ended March 31, 2008.

The results of consolidated operations are as follows:

For the year ended March 31, 2009, the Company had consolidated revenues of $1,899,751 with a net loss of $378,230 compared with consolidated revenues of $2,364,335 and a net loss of $147,178 for the year ended March 31, 2008.

The Company had cost of revenues of $1,197,954 for the year ended March 31, 2009, compared with cost of revenues of $1,274,111 for the year ended March 31, 2008, a decrease in the cost of revenues from the prior period of $76,157. The decrease in cost of revenues was attributable to a decrease in transportation costs within the Terminal division, offset with the increase in cost of products  from the manufacturing of the EKO-FLOR product during the year

Cost of revenues as a percentage of sales was 63.1% for the year ended March 31, 2009, compared with 53.9% for the year ended March 31, 2008. This increase is almost entirely attributable to the manufacturing costs associated with the EKO-FLOR products that required 100% outsourcing.  Being the first manufacturing run of this product the cost of manufacturing will improve with future orders.
 
The Company had gross profit of $701,797 for the year ended March 31, 2009, compared with gross profit of $1,090,224 for the year ended March 31, 2008, a significant decrease in gross profit of $388,427 or 35% over the prior period. The decrease was due to the introduction of the EKO-FLOR product as mentioned above.
 
The Company had combined administrative $820,805, research and development $44,094, depreciation $147,165 and other expenses of $12,408 for a total of $1,024,472 for the year ended March 31, 2009, compared to combined administrative $758,316, research and development $178,125, depreciation $29,673 and other expenses of $71,620 for a total of $1,037,734 for the year ended March 31, 2008, a decrease in expenses of $13,262 or 1% from the prior period. Administration costs increased with the additional focus and consequent allocation of resources to the EKO-FLOR product.  The research and development costs on the EKO-FLOR product decreased as a result of the finalization of the development and re-focus on marketing efforts during the year.
 
The Company’s research and development costs include the creation of architectural drawings as they relate to panel specifications, the creation of dies, the manufacturing of test panels, the creation of specific panel testing equipment, costs relating to independent certification testing, consulting costs associated with utilizing process experts and engineers and costs associated with the setup of the research and production center. The Company anticipates that research and development costs will increase in fiscal 2010 as a result of final preparations for the production of trial product, as well as costs associated with the development of the highway trailer product.

The Company further anticipates that ongoing research and development costs will stabilize after fiscal 2010 and be maintained at a rate proportional to sales.
 
The Minority Interest in consolidated subsidiaries was $12,855 for the year ended March 31, 2009 compared with $101,475 for the year ended March 31, 2008. This amount portrays the 49.9% minority interest in Conforce 1 Container Terminals, Inc., and decreased due to the decline in container terminal business during the year.
 
OFF-BALANCE SHEET ARRANGEMENTS
 
The Company has not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future affect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources and would be considered material to investors.

-13-

 
LIABILITIES

The Company had Accounts payable of $400,016 at March 31, 2009 compared to $296,897 at March 31, 2008, an increase of $103,119.  
 
The Company had related party loans payable to Marino Kulas, CEO, of $527,957 and a related party loan of $39,676 for a total of $567,633 as at March 31, 2009 compared with related party loans payable to the CEO of $426,347 as at March 31, 2008.  

The amounts due to shareholder and amounts due to related party are unsecured, non-interest bearing with no specific terms of repayment.  The amounts due to related parties arise from cash advances the shareholder and other related parties made to the Company for the purchase of machinery and equipment, primarily relating to the development of the composite flooring product and to fund ongoing operating activities.

The loans have been advanced at different increments depending on the needs of the Company and repayment is not expected to occur until 2012.  Given the long term nature of these loans, each time an amount is advanced by the shareholder or related party, a fair value calculation has been recorded with the discount on the loan being charged to contributed surplus.   The discount to fair value assumes repayment will be made on March 31, 2012 with imputed interest charged at rates between 6.5% and 10%.   Imputed interest was $30,010 (2008: $24,599)


Not applicable as Conforce is a smaller reporting company.


The financial statements required by Item 8 are submitted in a separate section of this Form and are incorporated herein by this reference.


In August 2009, the Company was notified that Pollard-Kelly Auditing Services, Inc. were permanently closing its offices and in effect resigning as the Company’s auditors effective immediately.  The Company has subsequently appointed BDO Canada LLP, as its independent auditors.  The Company has not  had any disagreements, whether or not resolved, with its accountants on accounting and/or financial disclosures during its recent fiscal year or any later interim period.


(a) Evaluation of Disclosure Controls and Procedures
  
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the period covered by this Annual report, management carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of March 31, 2009. Our principal executive officer and principal financial officer have concluded, based on their evaluation, that as of the end of the period covered by this report, our disclosure controls and procedures were not effective as a result of the material weakness in internal control discussed below.
 
(b) Management’s Report on Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Rule 13a-15(f) under the Exchange Act, internal control over financial reporting is a process designed by, or under the supervision of, a company’s principal executive and principal financial officers and effected by a company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. It includes those policies and procedures that:
 
 
1.
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of a company;
 
 
2.
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of a company are being made only in accordance with authorizations of management and the board of directors of the company; and
 
 
3.
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or deposition of a company’s assets that could have a material effect on its financial statements.
 
Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management has used the criteria established in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) to evaluate the effectiveness of the Company’s internal control over financial reporting. Management has selected the COSO framework for its evaluation as it is a control framework recognized by the SEC and the Public Company Accounting Oversight Board, that is free from bias, permits reasonably consistent qualitative and quantitative measurement of the Company’s internal controls, is sufficiently complete so that relevant controls are not omitted, and is relevant to an evaluation of internal controls over financial reporting.

Management of the Company conducted an evaluation of the effectiveness, as of March 31, 2009, of the Company’s internal control over financial reporting based on the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO Framework”). Based on its evaluation under the COSO Framework, management has concluded that the Company’s internal control over financial reporting was not effective as of March 31, 2009 due to the material weakness noted below.
 
Identification of a Material Weakness
 
Management has identified a lack of accounting knowledge from the service providers contracted to perform various accounting duties or offer guidance and direction in the proper accounting and disclosure of transactions.  This lack of knowledge resulted in a number of errors in the previously reported financial statements.   Specific areas of concern that were noted include the incorrect recording of transactions, a lack of timely reconciliations and an absence of supporting schedules.

This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management's report in this Annual Report on Form 10-K.

c) Changes in Internal Control Over Financial Reporting
 
There was no change in our internal control over financial reporting that occurred during the quarter ended March 31, 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. However, subsequent to March 31, 2009, Management has engaged the services of a chartered accountant, for a new internal financial controller function, and is looking to further strengthen the finance and accounting group with a CFO and qualified support staff.


Not applicable.

-14-


PART III
 

Set forth below is information regarding the Company’s current directors and executive officers. Marino Kulas and Slavko Kulas are first cousins. The directors are elected annually by stockholders. The executive officers serve at the pleasure of the Board of Directors.

Name
Age
Title
Marino Kulas
43
President & CEO, Director
Mario Verrilli 
43
Acting Chief Financial Officer 
Joseph DeRose
53
VP of Product Development
Kathryn Saliani
55
Director of Business Operations, Director
Slavko Kulas
48
Director of Terminal Operations
 
Marino Kulas, President & CEO of Conforce International, Inc., has been in the container industry for over 25 years. In 2001, Mr. Kulas commenced research and development of EKO-FLOR as an alternative to the wood flooring currently used in shipping containers.  In 2003 he started the business of Conforce 1 Container Terminals Inc. and in 2005, he started Conforce Container Corporation, the company responsible for the development of EKO-FLOR. He oversees all aspects of the day-to-day operations of the business, while maintaining his primary focus on the Company’s growth and direction through new product development and the commercialization of EKO-FLOR through account acquisition.
 
Mario Verrilli, Acting Chief Financial Officer.  Prior to joining Conforce, Mr. Mario Verrilli held the position of Senior Vice President, Global Operations for Omega Direct Response Inc., a leading provider of outsourced call centre services. Prior to Omega, Mr. Verrilli served as Director of Sales, Consumer Markets for Primus Canada where he was responsible for the creation and ownership of acquisition channels along with their respective P&L and operating budgets. Before joining Primus, he worked with AT&T Canada, where he held the position of International Settlement Analyst responsible for the settlement of financial transactions, revenue reporting and the creation of revenue distribution models. Mr. Verrilli started his career as a Revenue Analyst for Cadillac Fairview, a commercial developer and management company, where he was responsible for the accounting of revenue and expenses for a portfolio of shopping centres across Canada.
 
Joseph DeRose, Vice President of Product Development, is a chemical engineer and has dedicated his career to the testing, development and technical support of plastic materials, composite materials and polymer additives.  Prior to his appointment with Conforce in 2006, Mr. DeRose worked with industry leader Ciba Specialty Chemicals (f/n/a Ciba-Geigy) for over 19 years (1981 through 2000), where he held the position of Industry Manager of the Polymer Additives Division.  Following, through 2005, Mr. DeRose also held material testing and analysis positions with the Ontario Research Foundation and Cambridge Materials Testing.  Most recently, Mr. DeRose provided consultation and project coordination for manufacturers of plastic and composite materials seeking building code recognition in both Canada and the United States.  Mr. DeRose is a member of The Society of Plastics Engineers and serves on the Board of Directors of the Ontario Section.  He is also a member of the Canadian Plastics Industry Association and serves as Technical Chair for the Canadian Natural Composites Council.  For Conforce, Mr. DeRose is responsible for the research, development, testing and analysis of all new Conforce composite products currently in various stages of development.

Kathryn Saliani, Director of Business Operations.  Prior to joining Conforce, Ms. Saliani worked as an underwriter with a leading Mortgage origination firm in Canada for 3 years (2003 through 2006).  During 1988 through 2003, Kathryn performed as a sole proprietor, providing administrative and bookkeeping functions for various small companies.  Prior to holding that position, Ms. Saliani worked for Scotia Bank for 5 years (1982 through 1987) where she was responsible for conducting branch audits in order to ensure compliance with loan policy and procedure.  Ms. Saliani also spent 12 years (1970 through 1982) with the Workman Safety Insurance Board of Canada (WSIB) where she worked as Senior Counselor to the office of the Chairman.  Her responsibilities included dispute resolution and to act as direct liaison between member claimants and the WSIB.  For Conforce, Ms. Saliani oversees Investor Relations as well as all administrative functions of the Container Terminal operations.

Slavko Kulas, Director of Terminal Operations.  Mr. Slavko Kulas has been involved in the container industry for over 19 years.  In 1989, he joined Toronto Reefer Container (TRC), a Kulas private family business specializing in the service and repair of ocean-going containers.  Mr. Kulas’ responsibilities initially included the repair of all container components until he was promoted to Manager of the company’s mobile fleet of service trucks and personnel.  In 1998, Mr. Kulas purchased TRC.  In 2003, he joined Conforce 1 Container Terminals where he served as Terminal Manager until 2008 at which time he became Director of Terminal Operations.  For Conforce International, Inc., Mr. Kulas is responsible for the day-to-day operations of the Container Terminal and is a key member of the EKO-FLOR product development team.

-15-



March 31, 2009 SUMMARY COMPENSATION TABLE

Name and Principal Position
Year
Salary
($)
Bonus
($)
Stock
Awards
($)
Option
Awards
($)
Non-Equity
Incentive Plan
Compensation
($)
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)
All Other
Compensation
($)
Total
($)
Marino Kulas
President & CEO, Director
                 
                 
2009
  86,500
           
  86,500
2008
111,400
           
111,400
                   
Joseph DeRose
VP of Product Development
                 
                 
2009
45,800
 
  4,333
       
  50,133
2008
39,200
 
70,935
       
110,135
                   
Kathryn Saliani
Director of Business Op., Director
                 
                 
2009
44,500
           
44,500
2008
48,500
           
48,500
                   
Slavko Kulas
Director of Terminal Op.
                 
                 
2009
24,500
           
24,500
2008
31,000
           
31,000


The following table lists stock ownership of the Company’s Common Stock. The information includes beneficial ownership by (i) holders of more than 5% of Common Stock, (ii) each of the four directors and executive officers and (iii) all directors and executive officers as a group. Each person named in the table has sole voting and investment power with respect to all shares of the Company’s Common Stock beneficially owned by them.

-16-


 
Name and Address of Owner
 
Title of Class
Number
of Shares
Owned (1)
 
Percentage
of Class
Marino Kulas
40 Bellini Avenue
Brampton, Ontario L6T 3Z8
Common Stock
60,541,000
50.45%
Elio Guglietti
28 Anthia Drive
North York, Ontario M9L 1K5
Common Stock
11,700,000
9.7500%
Michael Moyal
10520 Yonge St., Suite 298
Richmond Hill, Ontario L4C 3C7
Common Stock
9,017,502
7.51%
Slavko Kulas
8870 Martingrove Road
Woodbridge, Ontario L4H 1C2
Common Stock
4,800,000
3.99%
Joseph DeRose
60 Crofters Road
Woodbridge, Ontario L4L 7C7
Common Stock
353,333
0.294%
Kathryn Saliani
156 Beech Street
Brampton, Ontario L6V 1V6
Common Stock
50,000
0.0417%
Total
Common Stock
86,461,835
72.05%
Directors and Executive Officers 
Common Stock 
60,944,333
50.78%
 
(1) Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities.

(2) Marino Kulas recognized that Slavko Kulas’ extensive contacts and over 19 years experience in the container industry made him an indispensible member of the Company’s management team and determined that it would be in the best interests of the Company and, by extension all Conforce shareholders, to complete the above-described transfer of shares to provide Slavko Kulas with additional incentive to achieve success in the commercialization of EKO-FLOR.


For the 12 month period ended March 31, 2009, Conforce had a balance of loans outstanding from its founder and CEO and shareholder, Marino Kulas in the amount of $527,957 and related party loans in the amount of $39,676 for a total of $567,676.  No interest is payable under these loans, however, they bear an imputed interest rate of between 6.5% and 10%  These loans have no fixed terms of repayment.  By comparison, for the 12 month period ended March 31, 2008, Conforce  had a balance of loans outstanding from Marino Kulas on the same terms in the amount of $426,347.


The audit fees for the fiscal year end March 31, 2009 were $82,500.  During such period, the Company did not incur any other audit-related fees, tax fees or other fees.  The audit fees for the fiscal year end March 31, 2008 were $14,000.

-17-


PART IV
 

Exhibit
 
No.
Description
2.0
Acquisition Agreement and Plan of Merger dated May 24, 2005 (1)
3.1
Certificate of Incorporation for Conforce International, Inc.  (1)
3.1.1
Certificate of Incorporation for Conforce Container Corporation (1)
3.1.2
Certificate of Incorporation for Conforce 1 Container Terminals, Inc. (1)
3.2
Bylaws (1)
10.1
Canada Small Business Financial Loan dated November 26, 2008 (2)
10.2
Sea Box, Inc. Purchase Order dated November 25, 2009  (3)
10.3
Letter of Agreement in Connection with the Strategic Partnership Between Conforce International, Inc. and Bayer MaterialScience, LLC. dated February 2, 2009  (3)
10.4
Advisory Agreement between WorldWide Associates, Inc. and Conforce International, Inc. dated April 2, 2007  (3)
 
(1) Denotes previously filed exhibits: filed on February 9, 2009 with Conforce International, Inc.’s 10-12G Registration Statement.
(2) Denotes previously filed exhibits: filed on May 28, 2009 with Conforce International, Inc.’s 10-12G/A Registration Statement.
(3) Denotes previously filed exhibits: filed on June 29, 2009 with Conforce International, Inc.’s 10-12G/A Registration Statement.
 
-18-

 
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

 
 
Conforce International, Inc.
 
       
    March 2, 2010
By:
/s/ Marino Kulas
 
   
Marino Kulas
 
   
President & CEO
 
       
 

 

-19-

 
 
 
Tel: 905 946 1066
Fax: 905 946 9524
www.bdo.ca
 
 
BDO Canada LLP
60 Columbia Way, Suite 300
Markham ON L3R 0C9 Canada
 

Auditors' Report
 


To the shareholders of
Conforce International Inc.

We have audited the consolidated balance sheets of Conforce International Inc. as at March 31, 2009 and as at March 31, 2008 and the consolidated statements of operations, shareholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the 2009 and 2008 financial statements referred to above present fairly, in all material respects, the financial position of Conforce International Inc. as of March 31, 2009 and as of March 31, 2008 and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming that Conforce International Inc. will continue as a going concern. As more fully described in Note 2, the Company has incurred recurring losses and its ability to continue as a going concern will depend on its ability to generate positive cash flows from operations or secure additional financing. There can be no assurance that the Company’s activities will be successful or sufficient and these conditions raise substantial doubt about the Company’s ability to continue as a going concern. The 2009 financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
 
Chartered Accountants, Licensed Public Accountants

Markham, Ontario
February 24, 2010
 

-20-


Conforce International Inc.
CONSOLIDATED FINANCIAL STATEMENTS
For the years ended March 31, 2009 (restated) and 2008 (restated)


Conforce International, Inc.
CONSOLIDATED BALANCE SHEETS
March 31, 2009 and 2008
   
2009
   
2008
 
   
(restated)
   
(restated)
 
   
(see note 5)
   
(see note 5)
 
             
Assets
           
Current Assets
           
Cash
  $ 72,232     $ 84,652  
Accounts receivable (note 6)
    397,560       729,375  
Inventory
    64,276       -  
      534,068       814,027  
                 
Plant and equipment (note 7)
    517,338       111,859  
Intangible assets (note 8)
    20,785       -  
Non-current assets
    16,176       4,155  
                 
    $ 1,088,367     $ 930,041  
                 
Liabilities
               
Current Liabilities
               
Accounts payable and accrued liabilities
  $ 400,016     $ 296,897  
Income taxes payable
    84,601       53,845  
Current portion of term loan (note 9)
    17,785       -  
      502,402       350,742  
                 
Deferred rent
    42,334       37,283  
Related party loans payable (note 10)
    445,508       303,280  
Term loan (note 9)
    177,928       -  
      1,168,172       691,305  
                 
Minority interest in consolidated subsidiary
    201,121       232,792  
                 
Shareholder's equity (deficiency)
               
Share capital (note 11)
    9,157       9,157  
Contributed surplus
    340,684       283,259  
Accumulated other comprehensive income
    39,049       5,114  
Accumulated deficit
    (669,816 )     (291,586 )
      (280,926 )     5,944  
                 
    $ 1,088,367     $ 930,041  
Going concern (note 2)
Commitment (note 12)
 
               
The accompanying notes are an integral part of these consolidated financial statements.
 
 
-21-


Conforce International, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the year ended March 31, 2009 and 2008
   
2009
   
2008
 
   
(restated)
   
(restated)
 
   
(see note 5)
   
(see note 5)
 
             
Container service revenue
  $ 1,553,540     $ 2,364,335  
Composite product revenue
    346,211       -  
      1,899,751       2,364,335  
                 
Cost of services
    813,224       1,274,111  
Cost of product revenue
    384,730       -  
      1,197,954       1,274,111  
                 
Gross margin
    701,797       1,090,224  
                 
Expenses
               
 General and administrative
    820,805       758,316  
 Research and development
    44,094       178,125  
 Interest on term loan
    2,165       -  
 Interest and bank charges
    1,017       685  
 Stock based compensation
    4,333       70,935  
 Amortization of plant and equipment
    147,165       29,673  
 Amortization of intangible assets
    5,810       -  
 Gain on foreign exchange
    (917 )     -  
      1,024,472       1,037,734  
                 
Income (loss) before non-operating item
    (322,675 )     52,490  
                 
 Interest on related party loans payable
    30,010       24,599  
Income (loss) before income tax and minority interest
    (352,685 )     27,891  
                 
Income tax expense
    12,690       73,594  
                 
Net loss before minority interest
    (365,375 )     (45,703 )
                 
Minority interest in consolidated subsidiary
    12,855       101,475  
                 
Net loss
    (378,230 )     (147,178 )
                 
Other Comprehensive income (loss):
               
Translation adjustment on foreign exchange
    33,935       5,114  
                 
Total comprehensive loss
  $ (344,295 )   $ (142,064 )
                 
Loss per share - basic and diluted
  $ (0.00 )   $ (0.00 )
Weighted average number of shares outstanding
    120,001,000       120,001,000  

The accompanying notes are an integral part of these consolidated financial statements.
 
-22-


Conforce International, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the year ended March 31, 2009 and 2008
   
2009
   
2008
 
   
(restated) 
    (restated)   
    (see note 5)    
(see note 5)
 
             
Operating activities
           
Net loss
  $ (378,230 )   $ (147,178 )
Items not affecting cash
               
Amortization of plant and equipment
    147,165       29,673  
Amortization of intangible assets
    5,810       -  
Imputed interest on related party loan payable
    30,010       24,599  
Stock based compensation
    4,333       70,935  
Minority interest in consolidated subsidiary
    12,855       101,475  
      (178,057 )     79,504  
Changes in non-cash working capital (note 16)
    383,584       (96,210 )
                 
Net cash provided by (used in) used in operating activities
    205,527       (16,706 )
                 
Investing activities
               
Purchase of plant and equipment
    (623,595 )     (39,584 )
Investment in intangible assets
    (29,043 )     -  
Increase in non-current assets
    (14,297 )     -  
                 
Net cash used in investing activities
    (666,935 )     (39,584 )
                 
Financing activities
               
Proceeds from term loan
    221,749       -  
Repayment of term loan
    (2,984 )     -  
Advances from related parties
    246,307       -  
                 
Net cash provided by financing activities
    465,072       -  
                 
Effect of foreign exchange on cash
    (16,084 )     15,177  
                 
Decrease in cash during the period
    (12,420 )     (41,113 )
                 
Cash, beginning of the period
    84,652       125,765  
                 
Cash, end of the period
  $ 72,232     $ 84,652  
                 
Supplemental cash flow information
               
Cash paid for interest
  $ 2,165     $ -  
 
The accompanying notes are an integral part of these consolidated financial statements.

-23-


Conforce International, Inc.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIENCY) - RESTATED
For the years ended March 31, 2009 and 2008
   
Common Stock
   
Contributed
   
Accumulated
   
Accumulated
Other
Comprehensive
   
Total
 
   
Shares
   
Amount
   
Surplus
   
Deficit
   
Income
       
                                     
Balances at March 31, 2007
    120,001,000     $ 9,157     $ 27,300     $ (125,077 )   $ -     $ (88,620 )
Prior period adjustment
            -       185,024       (19,331 )     -       165,693  
Restated balance March 31, 2007
    120,001,000       9,157       212,324       (144,408 )     -       77,073  
                                                 
Stock based compensation (restated)
            -       70,935       -       -       70,935  
Net loss (restated)
            -       -       (147,178 )     -       (147,178 )
Translation adjustments (restated)
            -       -       -       5,114       5,114  
Balance as at March 31, 2008 (restated)
    120,001,000       9,157       283,259       (291,586 )     5,114       5,944  
                                                 
Stock based compensation (restated)
            -       4,333       -       -       4,333  
Gain on imputed interest (restated) (note 10)
            -       53,092       -       -       53,092  
Net loss (restated)
            -       -       (378,230 )     -       (378,230 )
Translation adjustment (restated)
            -       -       -       33,935       33,935  
Balance as at March 31, 2009 (restated)
    120,001,000     $ 9,157     $ 340,684     $ (669,816 )   $ 39,049     $ (280,926 )
 
The accompanying notes are an integral part of these consolidated financial statements.

-24-


Conforce International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended March 31, 2009 and 2008
 

 
 
1.
DESCRIPTION OF BUSINESS

The Company operates in two reportable business segments; Container Terminal, and EKO-FLOR. The Container Terminal operations are organized as Conforce 1 Container Terminals, Inc., which is a 50.1% owned subsidiary of the Company. The remaining 49.9% is owned by Marino Kulas, Conforce International, Inc President & CEO. The Conforce 1 subsidiary is responsible for all container terminal operations. EKO-FLOR is organized as Conforce Container Corporation (“CCC”) a 100% owned subsidiary of the Company. The CCC subsidiary is responsible for the development, manufacturing and marketing of the Company’s EKO-FLOR products. Operations for CCC during the reportable periods to date have been limited to research and development as the product is in the testing stages. Its EKO-FLOR products have evolved systematically with various refinements, as previously noted, based on industry standards and various feedback received. 
 
The Company was incorporated on May 18, 2004 in the State of Delaware as Now Marketing Corp. and on May 20, 2005 Conforce Container Corporation was renamed from First National Preferred Card Service, Inc., which was incorporated under the laws of the Province of Ontario on February 9, 2001.  On May 25, 2005, the Company acquired Conforce Container Corporation in exchange for 120,000,000 shares of the Company’s Common Stock, making Conforce Container Corporation a wholly owned subsidiary.  Immediately prior to the acquisition, the Company had 1,000 shares of common stock issued and outstanding.  The acquisition was accounted for as a recapitalization of Conforce Container Corporation, as the shareholders of Conforce Container Corporation controlled the Company upon completion of the acquisition.  Conforce Container Corporation was treated as the acquiring entity for accounting purposes.  There were no adjustments to the carrying value of the assets or liabilities of the acquired company or to the assets and liabilities of the acquiring company.  The Company was then renamed Conforce International Inc. on May 25, 2005.

 
2.
GOING CONCERN

These consolidated financial statements have been prepared on the basis of United States generally accepted accounting principles ("GAAP") applicable to a 'going concern', which assume that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations. As at March 31, 2009 the Company had a net decrease in cash during the year and will continue to require additional funding which, if not raised, may result in the curtailment of activities. The Company has incurred net losses including $378,230 for the year ended March 31, 2009 and has an accumulated deficit of $669,816 as at March 31, 2009. The Company's ability to continue as a going concern depends on its ability to generate positive cash flow from operations or secure additional debt or equity financing.

Management regularly reviews and considers the current and forecast activities of the Company in order to satisfy itself as to the viability of operations. These ongoing reviews include consideration of current orders and future business opportunities, current development and production activities, customer and supplier exposure and forecast cash requirements and balances. Based on these evaluations management concluded that the Company is able to continue as a going concern.

There can be no assurances that the Company's activities will be successful or sufficient and as a result there is doubt regarding the "going concern" assumption and, accordingly, the use of accounting principles applicable to a going concern. These consolidated financial statements do not reflect adjustments that would be necessary if the "going concern" assumption were not appropriate. If the "going concern" assumption were not appropriate for these consolidated financial statements, then adjustments to the carrying values of the assets and liabilities, the reported revenues and expenses and the balance sheet classifications, which could be material, would be necessary.

-25-


Conforce International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended March 31, 2009 and 2008
 
 
 
3.
SUMMARY OF SIGNIFICANT ACCOUTING PRINCIPLES

Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”).  All amounts are reported in U.S. dollars unless otherwise stated.

In connection with the preparation of the March 31, 2009 financial statements, the Company noted a number of errors in previously released financial statements.  These errors impacted a number of statements, refer to note 5 for a summary of the restatement of previously reported financial statements.

Principles of Consolidation
The Consolidated financial statements include the accounts of the Company and its wholly and partially owned subsidiaries.  All intercompany transactions and balances have been eliminated on consolidation

Use of Estimates
The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the year. Actual results could differ from those estimates.
 
Significant estimates made by management of the Company include, an estimate of applicable interest rate for related party loans payable, uncollectible accounts receivable, and valuation allowances for deferred income tax assets.

Cash
Cash consists of cash on deposit and is designated as held-for-trading and carried at fair value. Changes in fair value are recorded in earnings.

Trade Accounts Receivable
The majority of the Company’s accounts receivable are due from large well established businesses. Credit is extended based on evaluation of a customer’s financial condition and accounts receivable are typically due within 30 days and are stated at amounts due from customers net of any allowances for doubtful accounts. The Company determines its allowance for doubtful accounts by considering a number of factors, including the length of time trade accounts receivable are past due, the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company, and the condition of the general economy and the industry as a whole. The Company writes-off accounts receivable when they become uncollectable, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. Interest is not accrued on past due receivables.  As at March 31, 2009 and 2008, no accounts receivable were considered at risk and the allowance for doubtful accounts was consequently nil.
 
Inventories
Raw materials, work-in-progress and finished goods are valued at the lower of cost, determined on a first-in first-out basis, and replacement value.

Plant and Equipment
Plant and equipment are recorded at cost less accumulated amortization and are amortized from the date of acquisition or, in respect of internally constructed assets, from the time an asset is substantially completed and ready for use.  Amortization is computed using the declining balance method as follows:
 
Office equipment
 
20% per annum declining basis
Vehicles
 
30% per annum declining basis
Machinery and equipment
 
20% per annum declining basis
 
Leasehold improvements are amortized on a straight-line basis over the term of the lease.

-26-


Conforce International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended March 31, 2009 and 2008
 
 
The Company reviews the recoverability of the carrying amount of plant and equipment when events or circumstances indicate that the carrying amounts may not be recoverable. This evaluation is based on projections of future undiscounted net cash flows. The total of these projected net cash flows is referred to as the “net recoverable amount.” If the net recoverable amount is less than the carrying value, the asset is written down to fair value.

Intangible assets with finite useful lives
The Company’s intangible assets consist of intellectual property and are considered to have a finite useful life. As a result the intangible assets are amortized on a 20% per annum declining basis.

Management reviews the amortization method and useful life estimate annually. The carrying amount of intangible assets are reviewed when events or circumstances indicate that the carrying amount may not be recoverable. This evaluation is based on projections of future undiscounted net cash flows. The total of these projected net cash flows is referred to as the “net recoverable amount.” If the net recoverable amount is less than carrying value, the asset is written down to fair value.

Revenue Recognition
Service revenues are recognized when there is persuasive evidence of an arrangement, services rendered, the amount is fixed or determinable, and collection is reasonably assured.  Revenue is recorded net of any applicable sales and value added taxes and customer discounts.

Product revenues are recognized when there is persuasive evidence of an arrangement, goods have been delivered, the amount is fixed or determinable, and collection is reasonably assured.  Revenue is recorded net of any applicable sales and value added taxes and customer discounts.

Research and Product Development Costs
Research costs and costs incurred in applying for patents and licenses are expensed as incurred. Product development costs are expensed as incurred until the product or process is clearly defined and the associated costs can be identified, technical feasibility is reached, there is an intention to produce or market the product, the future market is clearly defined and adequate resources exist or are expected to be available to complete the project. To date, no product development costs have been capitalized.
 
Stock-Based Compensation
The Company has agreements in place with certain senior management to compensate them through the direct issuance of common shares.  To date, 353,333 common shares have been issued or accrued by the current shareholders to management in satisfaction of these agreements.  These stock based payments have been expensed by the Company over the period in which service has been rendered.

Income Taxes
Income taxes are recorded using the liability method.  Deferred income tax amounts arise due to temporary differences between the accounting and income tax basis of the Company’s assets and liabilities and the unused tax losses of the Company. Deferred income tax assets and liabilities are measured using substantively enacted income tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in income tax rates and laws is recognized in the period that includes the date of substantive enactment. Deferred income tax assets are recognized to the extent that realization of such benefits is considered to be more likely than not.

Foreign Currency Translation
Transactions denominated in currencies other than the Canadian functional currency are translated into Canadian dollars at the average rate of exchange for the period.

For reporting purposes, assets and liabilities are translated into US dollars at the period-end exchange rates, and the results of its operations are translated at the average rate of exchange for the period. The resulting translation adjustments are recorded in accumulated other comprehensive income.
 
Net Loss Per Share
Net loss per common share is presented in accordance with Statement of Financial Accounting Standards No. 128, Earnings Per share (“SFAS 128”).  Basic loss per common share is computed by dividing the net loss attributable to common shareholders by the weighted average number of common shares outstanding during the period.    Diluted loss per common share is equal to the basic loss per common share as there are no potentially dilutive securities outstanding.
-27-


Conforce International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended March 31, 2009 and 2008

 
 
4.
NEW ACCOUNTING STANDARDS
 
In December 2007, the FASB issued FAS No. 160, "Non-controlling Interests in Consolidated Financial Statements - an amendment of ARB No. 51 ", ("FAS No. 160"). FAS No. 160 requires (i) that non-controlling (minority) interests be reported as a component of shareholders' equity, (ii) that net income attributable to the parent and to the non-controlling interest be separately identified in the consolidated statement of operations, (iii) that changes in a parent's ownership interest while the parent retains its controlling interest be accounted for as equity transactions, (iv) that any retained non-controlling equity investment upon the deconsolidation of a subsidiary be initially measured at fair value, and (v) that sufficient disclosures are provided that clearly identify and distinguish between the interests of the parent and the interests of the non-controlling owners. FAS No. 160 is effective for annual periods beginning after December 15, 2008 and should be applied prospectively. The presentation and disclosure requirements of the statement shall be applied retrospectively for all periods presented. The Company adopted FAS No. 160 on April 1, 2009 and there was no impact on its financial statements. Retroactive application of FAS 160 will have an effect on the presentation of the Company’s financial statements related to March 31, 2009.
 
In December 2007, the FASB issued Statement SFAS No. 141 (revised 2007), “Business Combinations,” which replaces SFAS No 141. The standard retains the purchase method of accounting for acquisitions, but requires a number of changes, including changes in the way assets and liabilities are recognized in the purchase accounting. It also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research and development at fair value, and requires the expensing of acquisition-related costs as incurred. SFAS No. 141R is effective for the Company beginning April 1, 2009 and will apply prospectively to business combinations completed on or after that date.
 
In April 2008, the FASB issued guidance that amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. The guidance is effective for fiscal years beginning after December 15, 2008. Early adoption is prohibited. The adoption of this standard is not expected to have a material effect on the Company’s results of operations or financial position.
 
In April 2009, the FASB issued guidance concerning interim disclosures about fair value of financial instruments requiring publicly traded companies to provide disclosure about the fair value of financial instruments whenever interim summarized financial information is reported. Previously, disclosures about the fair value of financial instruments were only required on an annual basis. Disclosure shall include the method(s) and significant assumptions used to estimate the fair value of financial instruments and shall describe changes in method(s) and significant assumptions, if any, during the period. This guidance was effective for interim and annual periods ending after June 15, 2009, and, as such, the Company will include this disclosure with its first quarter fiscal 2010 financial statements.
 
In May 2009, the FASB issued guidance regarding the disclosure of subsequent events. This guidance made no changes to current accounting but added required disclosures regarding the date through which the Company has evaluated subsequent events and whether that evaluation date is the date of financial statement issuance or the date the financial statements were available to be issued. This guidance was effective, and will be adopted by the Company, for interim and annual periods ending after June 15, 2009.
 
In June 2009, the FASB approved the “FASB Accounting Standards Codification” (the “Codification”) as the single source of authoritative nongovernmental U.S. GAAP to be launched on July 1, 2009. The codification does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place. All existing accounting standard documents will be superseded and all other accounting literature not included in the Codification will be considered no authoritative. The Codification is effective for interim and annual periods ending after September 15, 2009. Adoption by the Company is not expected to have a  material impact on its consolidated financial position, results of operation or cash flows.
 
-28-


Conforce International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended March 31, 2009 and 2008
 
 
 
5.
RESTATEMENT OF PREVIOUSLY REPORTED FINANCIAL STATEMENTS

In connection with the preparation of the March 31, 2009 audited financial statements, the Company noted a number of errors in the previously reported March 31, 2009 financial statements and the comparative financial statements for the year ended March 31, 2008.  These errors impacted a number of statements as summarized below:

Consolidated Balance Sheet
   
March 31, 2009
   
As previously
reported
   
As restated
Current assets
         
Cash
 
$
49,353
   
$
72,232
 
Accounts receivable
   
295,666
     
397,560
 
Inventory
   
-
     
64,276
 
Total current assets
   
345,019
     
534,068
 
                 
Plant and equipment
   
590,840
     
517,338
 
Intangible assets
   
-
     
20,785
 
Non-current assets
   
32,922
     
16,176
 
Total Assets
 
$
968,781
   
$
1,088,367
 
                 
Current liabilities
               
Accounts payable and accrued liabilities
 
$
135,404
   
$
400,016
 
Income taxes payable
   
-
     
84,601
 
Current portion term loan
   
2,303
     
17,785
 
Total current liabilities
   
137,707
     
502,402
 
                 
Deferred rent
   
-
     
42,334
 
Related party loans payable
   
405,987
     
445,508
 
Term loan
   
193,430
     
177,928
 
                 
Minority interest in consolidated subsidiary
   
460,525
     
201,121
 
                 
Shareholder’s equity
               
Share capital
   
9,157
     
9,157
 
Contributed surplus
   
94,233
     
340,684
 
Accumulated other comprehensive income
   
-
     
39,049
 
Accumulated deficit
   
(332,258
)
   
(669,816
)
     
(228,868
)
   
(280,926
)
                 
Total shareholder’s equity
 
$
968,781
   
$
1,088,367
 
 
 
a)
Cash was restated as a result of the reversing of a cheque written in the period subsequent to the year end and to account for the holding of USD denominated balances.
 
b)
Accounts receivable was restated as a result of an error in not recording the foreign exchange associated with holding receivables denominated in a foreign currency and the correct accounting for refundable Goods and Service Taxes resulting from the correction to purchases and payments.
 
c)
Inventory was restated as a result of an error in expensing raw materials that remained unused at March 31, 2009.
 
d)
Plant and equipment was restated as a result of certain items being incorrectly capitalized or incorrectly expensed and the use of an incorrect exchange rate in translating the balances at year end.
 
e)
Intangible assets were restated as a result of incorrectly expensing the items during the period.
 
f)
Other assets were restated as a result of cumulative errors from prior years and some amounts were expensed when incurred.
 
g)
Accounts payable was restated as a result of correcting the timing of the recognition of certain expenses that were recorded in subsequent periods.
 
h)
Income taxes payable has been updated to reflect the changes made to the financial statements.
 
i)
The current portion of the term loan payable was restated to reflect the amount of the principle due to be repaid during the following 12 month period rather than one month period.
 
j)
Deferred rent has been updated to reflect the straight line rent calculation.
 
k)
Related party loans payable was restated due to the cumulative effect of prior year’s errors and calculation of fair value with the associated imputed interest for related party loans (now recorded in contributed surplus) entered into during the year.
 
l)
The long term portion of the term loan was restated following the reclassification of the current portion of the term loan.
 
m)
Minority interest was restated as a result of the correction of prior period errors and adjustments reflecting errors noted in the current year statement of operations for the consolidated subsidiary.
 
n)
Contributed surplus was restated to reflect the correct stock based compensation expense incurred in prior periods and to account for the fair valuing of related party loans payable.
 
o)
Accumulated other comprehensive income was restated to reflect the correct accounting for the translation of the financial statements from the Canadian functional currency to the US reporting currency.
 
p)
Accumulated deficit was restated as a result of the cumulative errors in the reporting of revenue and expenses for the period ended March 31, 2009 and due to errors relating to years prior to March 31, 2009.
-29-


Conforce International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended March 31, 2009 and 2008


Condensed Consolidated Statement of Operations
   
March 31, 2009
   
As previously
reported
   
As restated
Revenues
 
$
2,021,389
   
$
1,899,751
 
                 
Costs of services and product revenues
   
1,019,766
     
1,197,954
 
                 
Gross profit
   
1,001,623
     
701,797
 
Expenses
               
General and administrative
   
664,437
     
820,805
 
Research and development
   
277,761
     
44,094
 
Interest on term loans
   
-
     
2,165
 
Interest and bank charges
   
-
     
1,017
 
Stock based compensation
   
4,333
     
4,333
 
Amortization of plant and equipment
   
64,248
     
147,165
 
Amortization of intangible asset
   
-
     
5,810
 
Gain on foreign exchange
   
(36,829
)
   
(917
)
     
973,950
     
1,024,472
 
Income (loss) before income tax and minority interest
   
27,673
     
(322,675
)
                 
Interest on related party loans payable
   
-
     
30,010
 
     
27,673
     
(352,685
)
Income tax expense
   
-
     
12,690
 
Net income (loss) before minority interest in consolidated subsidiary
   
27,673
     
 (365,375
)
                 
Minority interest in consolidated subsidiary
   
180,000
     
12,855
 
                 
Net loss
 
$
(152,327
)
 
$
(378,230
)
                 
Other Comprehensive loss
               
Translation adjustment on foreign exchange
   
-
     
33,935
 
                 
Total comprehensive loss
 
$
(152,327
)
 
$
(344,295
)

 
a)
Revenues were restated as a result of the errors noted in the March 31, 2008 year end, caused by the incorrect timing of the recognition of invoices and by recording foreign currency transactions in the nominal functional currency.
 
b)
Cost of services and product revenue were restated as a result of errors noted in the prior year, misclassification of invoices to expenses other than costs of services and product revenue and errors in capitalizing costs of sales or expensing items that should have otherwise been expensed.
 
c)
General and administrative expenses were restated as a result of errors in recording expenses in the applicable accounting period, or misclassification of expenses.
 
d)
Research and development costs were adjusted as a result of the erroneous expensing of certain items that were capital in nature, such as the acquisition of equipment.
 
e)
Interest on the term loan was reclassified as a separate item, where it had been incorrectly classified as General and administrative costs.
 
f)
Amortization of plant and equipment was restated to correctly calculate the appropriate amortization expense, in accordance with the stated amortization policies, after reflecting the errors noted in calculating the cost of capital equipment.
 
g)
Amortization of intangible assets was restated to reflect the set-up of intangible assets during the year.
 
h)
Gain on foreign exchange was restated as a result of an error in the treatment of the translation of the financial statements from the Canadian functional currency into a US reporting currency.
 
i)
Interest on related party loans payable was restated as a result of the calculation of the imputed interest applicable to discounting the loan to fair value using an estimated interest rate of between 8.25% and 10%.
 
j)
Interest and bank charges was restated as a result of the erroneous classification of this expense as General and Administrative expenses.
 
k)
Income tax expense was restated to reflect the tax provision applicable following the adjustments noted above and the applicable tax rate applied on an entity-by-entity basis.
 
l)
Minority interest in consolidated subsidiary was restated as a result of the impact of the above-noted restatements on the statement of operations of the consolidated subsidiary.
 
m)
Translation adjustment to comprehensive income was restated to reflect the correct accounting for the translation of the consolidated financial statements from the Canadian functional currency to the US reporting currency.

-30-


Conforce International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended March 31, 2009 and 2008

 
Consolidated Statement of Cash Flow
   
March 31, 2009
 
   
As previously
reported
   
As restated
 
Operating Activities
               
Net loss
 
$
(152,327
)
 
$
(378,230
)
Items not affecting cash
               
Minority interest in consolidated subsidiary
   
180,000
     
12,855
 
Amortization of plant and equipment
   
64,248
     
147,165
 
Amortization of intangible assets
   
-
     
5,810
 
Stock based compensation
   
4,333
     
4,333
 
Imputed interest on related party loans payable
   
-
     
30,010
 
Changes in non-cash working capital
   
218,596
     
383,584
 
Net cash provided by operating activities
   
314,850
     
205,527
 
                 
Investing activities
               
Purchase of plant and equipment
   
(485,924
)
   
(623,595
)
Investment in intangible assets
   
-
     
(29,043
)
Increase in Other assets
   
(18,143
)
   
(14,297
)
Net cash used in investing activities
   
(504,067
)
   
(666,935
)
                 
Financing activities
               
Proceeds from term loan
   
195,733
     
218,765
 
Advances from related parties
   
81,137
     
246,307
 
Net cash provided by financing activities
   
276,870
     
465,072
 
                 
Effect of exchange rate on cash
   
(73,101
)
   
(16,084
)
Net increase (decrease) in cash
   
14,552
     
(12,420
)
Cash, beginning of year
   
34,801
     
84,652
 
Cash, end of year
 
$
49,353
     
72,232
 
 
 
a)
Net loss was restated to reflect the change in the Statement of operations resulting from the errors noted above.
 
b)
Items not affecting cash were restated as a result of the errors noted above.
 
c)
Changes in the non-cash working capital were restated, primarily as a result of the errors noted in the timing of the recording of revenues and expenses.
 
d)
Purchase of plant and equipment was restated to correct the erroneous expensing of items that should have been capitalized and capitalizing of items that should have been expensed.
 
e)
Purchase of intangible assets was restated as a result of the error noted in expensing an item that should have been capitalized.
 
f)
Increases in other assets was adjusted to reflect the cumulative effect of prior years adjustments and the additional deposit for a facility the Company occupied during the last half of the fiscal year.
 
g)
Proceeds from term loans was restated as a result of the application of the average exchange rate between the US reporting currency and the Canadian functional currency.
 
h)
Proceeds from related party loans payable was adjusted to reflect the receipt of the cash amount, net of any gain on imputed interest.
 
i)
The effect of the foreign exchange on cash was restated to recognize the use of an average foreign exchange rate for the preparation of the Statement of Cash Flows and the balance sheet foreign exchange rate for the Balance sheet translation.

-31-


Conforce International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended March 31, 2009 and 2008

 
Consolidated Balance Sheet
   
March 31, 2008
   
As previously
reported
   
As restated
Current assets
         
Cash
 
$
34,801
   
$
84,652
 
Accounts receivable
   
494,184
     
729,375
 
Total current assets
   
528,985
     
814,027
 
                 
Plant and equipment
   
96,063
     
111,859
 
Non-current assets
   
14,779
     
4,155
 
Total Assets
 
$
639,827
   
$
930,041
 
                 
Current liabilities
               
Accounts payable and accrued liabilities
 
$
115,326
   
$
296,897
 
Income taxes
   
-
     
53,845
 
Total current liabilities
   
115,326
     
350,742
 
Deferred rent
   
-
     
37,283
 
Related party loans payable
   
324,850
     
303,280
 
Minority interest
   
280,525
     
232,792
 
                 
Shareholder’s equity
               
Share capital
   
9,157
     
9,157
 
Contributed surplus
   
89,900
     
283,259
 
Accumulated other comprehensive loss
   
-
     
5,114
 
Accumulated deficit
   
(179,931
)
   
(291,586
)
     
(80,874
)
   
5,944
 
                 
Total shareholder’s equity
 
$
639,827
   
$
930,041
 
 
 
a)
Cash was restated as a result of the transfer of a number of stale dated cheques that had been issued to a shareholder for payment of services rendered that were not going to be replaced, but rather constituted a non-interest bearing amount due to the shareholder.
 
b)
Accounts receivable were restated as a result of the incorrect accounting of invoices which were booked subsequent to the fiscal year but were in respect of services rendered in the fiscal year ended March 31, 2008.  In addition, a tax refund was received subsequent to the year-end relating to prior periods and refundable Goods and Services Taxes resulting from errors in the period of recognition of revenues and expenses.
 
c)
Plant and equipment was restated as a result of an incorrect exchange rate used in translating the balances at year end.  A historical exchange rate had been applied rather than the year end exchange rate.
 
d)
Other non-current assets were restated to eliminate amounts recorded as deposits for rental property.
 
e)
Accounts payable were restated as a result of the incorrect accounting for invoices that were recorded in the subsequent period but related to services rendered during the fiscal year ended March 31, 2008.
 
f)
Income taxes payable has been updated to reflect the changes made to the financial statements.
 
g)
Deferred rent has been updated to reflect the straight line rent calculation.
 
h)
Related party loans payable was restated to account for the imputed interest associated with the receipt of non-interest bearing shareholder loans as a result of cheques that were not cashed.
 
i)
Minority interest was restated as a result of the adjustments noted above impacting the partially owned subsidiary.
 
j)
Contributed surplus was restated to reflect the correct stock based compensation expense incurred in the current and prior periods and to account for the gain in the fair valuing of the related party loans payable.
 
k)
Accumulated deficit was restated as a result of the cumulative errors in the reporting of revenue and expenses and as a result of errors for the period ended March 31, 2008 and for errors identified that related to years prior to March 31, 2008.

-32-


Conforce International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended March 31, 2009 and 2008

 
Consolidated Statement of Operations
   
March 31, 2008
 
   
As previously
reported
   
As restated
 
Revenues
  $ 2,364,945     $ 2,364,335  
                 
Costs of services and product revenue
    1,293,100       1,274,111  
                 
Gross profit
    1,071,845       1,090,224  
Expenses
               
General and administrative
    663,391       758,316  
Research and development
    209,437       178,125  
Interest and bank charges
    -       685  
Stock based compensation
    62,500       70,935  
Amortization of property and equipment
    30,121       29,673  
      965,449       1,037,734  
Other income and expense
    7,285       -  
Interest on shareholder loans
    -       24,599  
Income from before income tax and minority interest
    99,111       27,891  
                 
Income tax expense
    -       73,594  
                 
Net income (loss) before minority interest
    99,111       (45,703 )
                 
Minority interest in consolidated subsidiary
    153,965       101,475  
                 
Net loss
  $ (54,854 )   $ (147,178 )
                 
Other Comprehensive loss
               
Translation adjustment on foreign exchange
    -       5,114  
                 
Total comprehensive loss
  $ (54,854 )   $ (142,064 )

 
a)
Revenues were restated to reflect an error in recording invoices for services rendered during the year ended March 31, 2008 in the subsequent year.
 
b)
Costs of services and product revenue were restated as a result of errors in recording invoices for services received during the year ended March 31, 2008 in the subsequent fiscal year.
 
c)
General and administrative expenses were restated as a result of errors in recording expenses in the correct accounting period and the reclassification of expenses between categories.
 
d)
Research and development costs were adjusted as a result of the errors in recording invoices in the correct accounting period and the reclassification of expenses between categories.
 
e)
Interest on shareholder loans was restated as a result of the calculation of the imputed interest applicable to discounting the shareholder loan to fair value using an estimated interest rate of between 8.25% and 10%.
 
f)
Amortization of plant and equipment was restated to reflect the average exchange rate for the year ended March 31, 2008 instead of the historical interest rate applied at the time the assets were acquired.
 
g)
Other income and expenses were restated as a result of an error in the treatment of the translation of the financial statements from the Canadian functional currency into a US reporting currency.
 
h)
Income tax expense was restated to reflect that tax provision applicable after the adjustments noted above were made and the applicable tax rate applied on an entity-by-entity basis.
 
i)
Minority interest in the consolidated subsidiary was restated as a result of the impact of the above-noted restatements to the Statement of Operations of the consolidated subsidiary.
 
j)
Translation adjustment to comprehensive income was restated to reflect the accounting for the translation of the Consolidated financial statements from the Canadian functional currency to the US reporting currency.

-33-


Conforce International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended March 31, 2009 and 2008

 
Consolidated Statement of Cash Flow

   
March 31, 2008
 
   
As previously
reported
   
As restated
 
Operating Activities
               
Net loss
 
$
(54,854
)
 
$
(147,178
)
Items not affecting cash
               
Minority interest in consolidated subsidiary
   
153,965
     
101,475
 
Amortization of plant and equipment
   
30,121
     
29,673
 
Stock based compensation
   
62,600
     
70,935
 
Imputed interest on shareholder loan
   
-
     
24,599
 
Changes in non-cash working capital
   
(229,366
)
   
(96,210
)
Net cash provided by (used in) operating activities
   
(37,534
)
   
(16,706
)
                 
Investing activities
               
Purchase of property and equipment
   
(39,972
)
   
(39,584
)
                 
Net cash provided by (used-in) investing activities
   
(39,972
)
   
(39,584
)
                 
Net cash provided by financing activities
   
-
     
-
 
                 
Effect of exchange rate on cash
   
37,475
     
15,177
 
Net decrease in cash
   
(40,031
)
   
(41,113
)
Cash, beginning of year
   
74,832
     
125,765
 
Cash, end of year
 
$
34,801
   
$
84,652
 
                 
 
a)
Net loss was restated to reflect the change in the Statement of Operations resulting from the errors noted above.
 
b)
Items not affecting cash were restated as a result of the errors noted above.
 
c)
Changes in the non-cash working capital were restated, primarily as a result of the errors noted in the timing of the recording or revenues and expenses.
 
d)
Purchase of plant and equipment was restated to reflect the errors in translating into a US reporting currency.
 
e)
Increase in loans from related parties is restated to reflect the cash received.
 
f)
The effect of the foreign exchange on cash was restated to recognize the use of an average foreign exchange rate for the preparation of the Statement of Cash flows and the balance sheet foreign exchange rate for the Balance sheet translation.

-34-


Conforce International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended March 31, 2009 and 2008
 

 
6.
ACCOUNTS RECEIVABLE

Accounts receivable for the year ended March 31:

   
2009
   
2008
 
Trade accounts receivable
  $ 318,576     $ 692,008  
Goods and services tax receivable
    78,984       37,367  
    $ 397,560     $ 729,375  

Within the trade accounts receivable balances for 2009, 97% of the balance is due from 4 customers.  Within the trade receivable balance for 2008, 98% of the balance due is from 3 customers.

 
 
7.
PLANT AND EQUIPMENT

As at March 31, 2009, the net book value of the plant and equipment is as follows:
         
Accumulated
       
   
Cost
   
amortization
   
Net book Value
 
Office equipment
  $ 19,328     $ 6,958     $ 12,370  
Vehicles
    17,886       11,959       5,927  
Machinery and equipment
    655,821       169,421       486,400  
Leasehold improvements
    22,120       9,479       12,641  
    $ 715,155     $ 197,817     $ 517,338  

As at March 31, 2008 the net book value of the plant and equipment is as follows:
         
Accumulated
       
   
Cost
   
amortization
   
Net book Value
 
Office equipment
  $ 23,728     $ 4,746     $ 18,982  
Vehicles
    21,958       11,562       10,396  
Machinery and equipment
    120,239       58,708       61,531  
Leasehold improvements
    27,155       6,205       20,950  
    $ 193,080     $ 81,221     $ 111,859  

 
 
8.
INTANGIBLE ASSETS

         
Accumulated
       
   
Cost
   
amortization
   
Net book Value
 
Trade marks
  $ 25,983     $ 5,198     $ 20,785  

There were no intangible assets as at March 31, 2008.

-35-


Conforce International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended March 31, 2009 and 2008

 
 
9.
TERM LOAN
 
In November 2008, the company entered into a loan agreement in the amount of CAD $ 250,000 under the Canada Small Business Financing Act for the purchase of machinery and equipment to be used in the manufacturing of the composite flooring.  The loan is secured with a first charge on the equipment purchased and a CAD $62,500 personal guarantee provided by the CEO.
The term of the loan is ten years with interest at a floating rate of prime + 3%.  The minimum blended loan and repayments for the next 5 years and thereafter, assuming, the floating interest rate remains constant at 5.25%, is as follows:

Fiscal year ended March 31,

2010
  $ 17,785  
2011
    18,742  
2012
    19,750  
2013
    20,812  
2014
    21,932  
Thereafter
    96,692  
Total amount payable
    195,713  
   Less Current portion
    17,785  
    $ 177,928  

 
 
10.
RELATED PARTY LOAN PAYABLE AND RELATED PARTY TRANSACTIONS

   
2009
   
2008
 
Due to shareholder
  $ 527,957     $ 426,347  
Due to related party
    39,676       -  
 
    567,633       426,347  
Less: discount to fair value
    (122,125 )     (123,067 )
    $ 445,508     $ 303,280  

The amounts due to shareholder and amounts due to related party are unsecured, non-interest bearing with no specific terms of repayment.  The amounts due to related parties arise from cash advances the shareholder and other related parties made to the Company for the purchase of machinery and equipment, primarily relating to the development of the composite flooring product and to fund ongoing operating activities.

The loans have been advanced at different increments depending on the needs of the Company and repayment is not expected to occur until 2012.  Given the long term nature of these loans, each time an amount is advanced by a related party, a fair value calculation has been recorded with the discount on the loan being charged to contributed surplus.   The discount to fair value assumes repayment will be made on March 31, 2012 with imputed interest charged at rates between 6.5% and 10%.   Imputed interest was $30,010 (2008: $24,599).

The Company rents three pieces of equipment on a month to month basis from a company owned by a relative of the CEO.  Rent expense for the year ended March 31, 2009 was $66,927 (2008: $10,562).  Management considers the rental rate paid by the Company to the related party to be at market rates.

The CEO is the 49.9 % minority shareholder of Conforce 1 Container Terminals, Inc.

-36-

 
Conforce International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended March 31, 2009 and 2008


 
11.
SHARE CAPITAL

Preferred Shares
At March 31, 2009 and 2008, the Company had authorized 5,000,000 preferred shares with a par value of $.0001 per share and may be issued in designated series from time to time by one or more resolutions adopted by the Board of Directors.

As at March 31, 2009 and 2008 no preferred shares were issued and outstanding.
 
Common Stock
At March 31, 2009 and 2008, the Company had authorized 250,000,000 shares of Common Stock at a par value of CAD $.0001 per share.  

As at March 31, 2009 and 2008 there were 120,001,000 shares issued and outstanding.

Stock Transactions
On October 26, 2006, the Company entered into an employment agreement (the “VP Employment Agreement”) with its Vice-President, Product Development.  The initial term of the VP Employment Agreement was twelve months.  Pursuant to the terms of the VP Employment Agreement, a founding shareholder of Conforce agreed to provide 10,000 shares of his personal Common stock per month for a twelve month period.  In addition, a founding shareholder of Conforce agreed to provide 200,000 of his personal shares of Common Stock at the end of the employment term (i.e. October 26, 2007) Shares provided under the VP Employment Agreement during the year ended March 31, 2008 totaled 270,000 and were valued at $70,935 and shares provided during the year ended March 31, 2007 totaled 50,000 and were valued at $50,665.  These valuations were based on the trading value of shares of the Common Stock on the date the shares were provided which in all cases occurred on the same day.

On October 31, 2007, the Company entered into an extension of the VP Employment Agreement for a period of twelve months, through October 31, 2008.  In accordance with this extension, additional compensation in the form of common stock of the Company would be granted if certain performance criteria were satisfied in connection with the development of the EKO-FLOR products.  A founding shareholder of Conforce agreed to provide the common shares required under the terms of this extension.  As at March 31, 2009 none of the performance criteria were met, consequently, no additional shares of Common Stock were provided under the VP Employment Agreement.

On October 31, 2008, the Company further extended its VP Employment Agreement for an additional twelve months to October 31, 2009.  Under this extension, the Company agreed to provide 320,000 shares of common stock at the end of the period provided certain performance criteria were satisfied in connection with the development and commercialization of Eko-Flor products.  If required, a founding shareholder of Conforce has agreed to provide the common shares in satisfaction of this agreement.   As at March 31, 2009, the performance criteria were not satisfied in connection with the development of the Eko-Flor products and as such, no common stock was transferred to the VP Product Development.    The agreement also provided for the granting of an additional 80,000 shares of common stock at the end of the renewal period (October 31, 2009) from a previous agreement for which the performance criteria has been met.  A founding shareholder agreed to provide these additional common shares.   As at March 31, 2009, a total of 33,333 common shares were expensed under this provision with a fair value of $4,333 based on the trading value of shares as at March 31, 2009.

 
 
12.
COMMITMENTS

The Company leases office space under a five year lease which runs through April 2012.  Monthly lease payments are $2,883.

The Company leases container terminal site space under a lease which originally ran from April 2004 to March 2007. The lease was renewed in April 2007 for an additional five year term to March 2012 with monthly lease payments increasing by $3,514 to $14,641 per month.   

In December 2008, the Company entered into a three year lease for its production and development centre site space. The monthly payments are $9,350 and will commence in January 2009 and run until December 2011.

Future lease commitments are as follows:

2010     
 
$
294,094
 
2011    
   
293,085
 
2012     
   
153,619
 
2013  
   
8,820
 
   
$
749,618
 
 
-37-


Conforce International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended March 31, 2009 and 2008
 

 
13.
INCOME TAXES
 
The provision for income taxes for the years ended March 31 consists of the following:
 
  
2009
   
2008
 
                 
Income tax
  
$
12,690
  
 
$
73,594
  
Deferred income tax expense (benefit)
  
 
(81,390
   
-
 
Change in valuation allowance
  
 
81,390
  
   
-
 
Provision for income taxes
  
$
12,690
  
 
$
73,594
 
 
The reconciliation of income tax expense (benefit) for the years ended March 31 computed combined federal and provincial statutory rate to income tax expense (benefit) is as follows:
                 
 
  
2009
   
2008
 
     
Income tax expense (benefit) at combined statutory tax of 33%
  
 $
(116,386
   
9,204
 
                 
Permanent differences, net
  
 
22,306
  
   
72,992
 
Adjustment of temporary differences to income tax returns
  
 
-
  
   
(8,602
)
Change in valuation allowance
  
 
81,390
  
   
-
 
 
  
             
Income tax expense
  
$
12,690
  
 
$
73,594
 
 
The significant components of the deferred tax accounts recognized for financial reporting purposes are as follows:
 
 
  
2009
   
2008
 
Deferred tax assets:
  
             
Net operating loss and other carry forwards
  
$
31,848
  
 
$
-
  
Property and equipment amortization
  
 
48,743
  
   
-
  
Intangible asset amortization
  
 
799
  
   
-
  
 
  
             
Total deferred tax assets
  
 
81,390
  
   
-
  
     
Valuation allowance
  
 
(81,390
   
-
 
 
  
             
 
  
$
-
   
$
-
 
 
As at March 31, 2009 the Company had net operating loss carry forwards of approximately $244,170 for both Federal and Provincial tax purposes, which expire in varying amounts between 2018 and 2019.  The Company’s net deferred tax asset has been offset by a valuation allowance of the same amount. The valuation allowance has been recorded due to the uncertainty of realization of the deferred tax asset.

-38-


Conforce International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended March 31, 2009 and 2008

 
 
14.
FINANCIAL INSTRUMENTS

In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 establishes a framework for measuring the fair value of assets and liabilities. This framework is intended to provide increased consistency in how fair value determinations are made under various existing accounting standards that permit, or in some cases require, estimates of fair market value. SFAS 157 also expands financial statement disclosure requirements about a corporation’s use of fair value measurements, including the effect of such measures on earnings. This standard is effective for fiscal years beginning after November 15, 2007. The Company adopted this new guidance effective April 1, 2008. This standard did not change the Company’s consolidated financial position, results of operations or cash flows. For non-financial assets and non-financial liabilities, the standard is effective for financial statements issued for fiscal years beginning after November 15, 2008. The Company plans to adopt this guidance effective April 1, 2009. Conforce is currently assessing the effect this standard may have on the Company’s results of operations and consolidated financial position.
 
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159 is expected to expand the use of fair value accounting but does not affect existing standards which require certain assets or liabilities to be carried at fair value. The objective of SFAS 159 is to improve financial reporting by providing companies the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. Under SFAS 159, a corporation may choose, at specified election dates, to measure eligible items at fair value and report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. SFAS 159, for financial assets and financial liabilities, is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company adopted this new guidance effective April 1, 2008. This standard did not have a material effect on the Company’s consolidated financial position, results of operations or cash flows.

Fair Values
Generally accepted accounting principles require that the Company disclose information about the fair value of its financial assets and liabilities.  Fair value estimates are made at the balance sheet date based on relevant market information and information about the financial instrument.  These estimates are subjective in nature and involve uncertainties in significant matters of judgment and therefore cannot be determined with precision.  Changes in assumptions could significantly affect these estimates.

The carrying value of cash, accounts receivable, accounts payable and accrued liabilities approximates fair value due to the immediate or short-term maturity of these instruments.

The fair value of the related party loans payable is calculated assuming the amounts outstanding will be repaid on March 31, 2012 and have imputed interest of between 6.5% and 10%.

The fair value of term loans is calculated based on interest rates that are consistent with the current rates offered to the Company for debt with similar terms.

Credit Risk
Credit risk arises from the potential that a counter party will fail to perform its obligations. The Company is exposed to credit risk from both customers and on amounts held on deposit in financial institutions. In order to reduce its credit risk, the Company reviews a new customer's credit history before extending credit and conducts regular reviews of its existing customers' credit performance. An allowance for doubtful accounts may be established based upon factors surrounding the credit risk of specific accounts, historical trends and other information.

-39-


Conforce International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended March 31, 2009 and 2008

 
Currency Risk
Currency risk is the risk to the Company's earnings that arise from fluctuations of foreign exchange rates and the degree of volatility of these rates. For the container operations the customers and suppliers are located in Canada and there is limited exposure to currency risk.  The EKO-FLOR operations will have international customers and the sale of product may be negotiated in a currency other than the Canadian functional currency.  Purchase of equipment and supplies will also be sourced from foreign sources.  Because of current limited activity in the EKO-FLOR operations fluctuations in the foreign exchange rates will not be significant.
 
Interest rate risk
The Company has almost ten years remaining on a term loan which is variable based on current prime rate  An increase/decrease of 3% in the interest rates would increase/decrease the annual interest expense by approximately $5,800.

Liquidity risk
The Company manages its liquidity risk by preparing and reviewing actual and forecasted cash flows.  There are no assurances the sources of funds will be available to satisfy current obligations as noted in Note 2 Going Concern.

 
15.
BUSINESS SEGMENTS

The Company operated in two reportable business segments; Container Terminal, and EKO-FLOR.  The Container Terminal operations are organized as Conforce 1 Container Terminals, Inc., a 50.1% owned subsidiary of the Company.  The subsidiary is responsible for all container terminal operations.  EKO-FLOR is organized as Conforce Container Corporation a 100% owned subsidiary of the Company.  This subsidiary is responsible for the development, manufacturing and marketing of the Company’s EKO-FLOR product.  Operations to date have been research and development and an order from one customer. 

Business Segments –For the Year Ended March 31, 2009
   
Container
             
   
Terminals
   
EKO-FLOR
   
Consolidated
 
                   
Revenues
 
$
1,553,540
   
$
346,211
   
$
1,899,751
 
                         
Cost of services and product revenue
   
813,224
     
384,730
     
1,197,954
 
Interest expense
   
25,304
     
7,888
     
33,192
 
Amortization of long lived assets
   
22,447
     
130,528
     
152,975
 
Income tax expense
   
12,690
     
-
     
12,690
 
Other expenses
   
654,123
     
214,192
     
868,315
 
                         
Minority Interest
   
12,855
     
-
     
12,855
 
                         
Net income (loss)
 
$
12,897
   
$
(391,127
)
 
$
(378,230)
 
 
Total Assets, March 31, 2009
 
Container Terminals                                                      
 
$
353,966
 
EKO-FLOR                                
   
734,401
 
Consolidated Total Assets
 
$
1,088,367
 
 
For the year ended March 31, 2009, 95% of the Container Terminal revenue was generated by three major customers and 100% of the EKO-FLOR revenue was generated from a single customer.

-40-


Conforce International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended March 31, 2009 and 2008

 
Business Segments –For the Year Ended March 31, 2008 (restated)
   
Container
               
   
Terminals
   
EKO-FLOR
     Consolidated  
                     
Revenues
 
$
2,364,335
   
$
-
   
$
2,364,335
 
                         
Cost of services and product revenue
   
1,274,111
     
-
     
1,274,111
 
Interest expense
   
25,284
     
-
     
25,284
 
Amortization of long lived assets
   
29,673
     
-
     
29,673
 
Income tax expense
   
73,594
     
-
     
73,594
 
Other expenses
   
758,316
     
249,060
     
1,007,376
 
Minority interest
   
101,475
       
-
   
101,475
 
Income (Loss)
 
$
101,882
   
$
(249,060
)
 
(147,178)
 

Total Assets, March 31, 2008

Container Terminals
 
$
930,041
 
EKO-FLOR
   
-
 
Consolidated Total Assets                                           
 
$
930,041
 

For the year ended March 31, 2008, 95% of the Container Terminal revenue was generated by three customers.


 
16.
 CHANGES IN NON-CASH WORKING CAPITAL

   
2009
   
2008
 
   
(restated)
   
(restated)
 
             
Accounts receivable
  $ 219,708     $ (332,171 )
Inventory
    (71,847 )     -  
Non-current assets
    -       4,132  
Accounts payable and accrued liabilities
    176,808       148,558  
Income taxes payable
    45,541       53,550  
Deferred rent
    13,374       29,721  
    $ 383,584     $ (96,210 )
 
 
 
17.
COMPARATIVE STATEMENTS

The restated comparative figures have been reclassified to conform to the current year’s presentation.
 
 
-41-